More than six months into the coronavirus pandemic, the end is still out of sight. Authorities have predicted a COVID-19 vaccine will not be widely available until well into next year.
Which means if we have to spend more than 12 months living with coronavirus restrictions, some of the changes we have made to our lives are likely to turn into lasting habits. Things like working from home and shopping online.
Shifts in consumer behaviours resulting from the pandemic have real financial impacts for ASX shares. When spending patterns change, revenues can ebb and flow, or redirect to a different product or service.
With the social change brought by COVID-19 in mind, let’s take a look at 4 ASX shares for a post-coronavirus world.
Livetiles Ltd (ASX: LVT)
Livetiles is a technology company supplying software used to create corporate intranets and employee portals. With operations across the US, Europe, and Australia, the ASX share has benefitted from the shift to remote working caused by the pandemic, which has increased interest in its products. COVID-19 has accelerated global digital workplace software adoption.
Livetiles operates a software-as-a-service (SaaS) business. Its products create enhancements to underlying Microsoft platforms such as Office 365 and Azure. These enhancements address common business needs and priorities.
Having secured its first customer in 2015, Livetiles now has more than 1,200 enterprise customers and more than 1,000 recurring subscription customers.
The COVID-19 pandemic has shifted solutions like those offered by Livetiles from “nice to have” to “must have” status. While the sales environment for enterprise software remains challenging, strong medium and long term tailwinds are pushing the adoption of digital workplace software. This should support long-term growth in Livetiles revenue.
The ASX share reported strong revenue growth in the fourth quarter – annualised recurring revenue increased to $58.2 million from $5.2 million at the end of March.
Kogan.com Ltd (ASX: KGN)
Online retailer Kogan has seen sales boom since the onset of the pandemic. As physical stores shut, consumers moved to transacting online, boosting Kogan’s bottom line. The ASX share reported a 103% increase in gross sales in April and May, which led to 130% increase in gross profit. Sales continued at an accelerated pace even after the first lockdown ended, with June sales of more than $94 million.
In 4Q FY20 Kogan grew gross sales by more than 95% and gross profit by 115%. Adjusted EBITDA grew by more than 149%. The company reported it had more than 2 million active customers at the end of June, with 109,00 active customers added during the month.
This means Kogan, which listed on the ASX in 2016, has delivered four consecutive years of significant growth in sales and earnings. Founder Ruslan Kogan said: “Our business is booming as more customers than ever choose Kogan.com.”
Kogan is due to release its full year results next Monday. Investors are expecting big things with the Kogan share price increasing 300% over the past year. But the ASX share stands to benefit greatly from the long term shift to digital which has been accelerated by current events. This is demonstrated in the company’s most recent results – July sales were up more than 110% year on year with active customers growing to over 2.3 million.
Afterpay Ltd (ASX: APT)
Australia’s largest buy-now-pay-later (BNPL) provider, Afterpay, was already reporting phenomenal growth prior to the onset of COVID-19. The pandemic has accelerated this growth with underlying sales in the fourth quarter growing 127% to $3.8 billion, the highest quarterly sales performance ever. The BNPL provider now boasts 9.9 million customers, a 116% increase compared to 30 June 2019 and above the target of 9.5 million by the end of FY20.
Afterpay has benefitted from the flight to online spending and an increased focus on budgeting in the current economic environment. The ASX share is focused on growing underlying sales and prioritising global expansion in the short term in order to maximise shareholder value in the long-term. To this end, Afterpay raised $800 million in capital last month to invest in growth.
Afterpay is now well-capitalised to grow its position in each market and expedite its expansion into new markets. The additional capital also provides the capacity to execute on potential M&A opportunities that may arise. There are plans to launch in Canada and roll out in-store services in the US in 1Q FY21. FY21 is expected to be a year of increased investment for Afterpay as it maintains its strong momentum and capitalises on the opportunity to scale globally.
Megaport Ltd (ASX: MP1)
Megaport operates in the network-as-a-service space, providing bandwidth to allow customers to connect to cloud services and data centres. The company has been focused on expanding its network footprint to new markets and deepening its reach in existing ones. Following expansion into Denmark and Spain in 4Q FY20, the Megaport platform is now available in 23 countries and 128 cities. The ASX share now serves 1,842 customers including Amazon, Facebook, Tesla, and Salesforce.
Megaport reported strong growth in revenue and customer numbers in FY20 as ecosystem richness drove greater service connection opportunities. Customer numbers grew from 1,490 at the end of FY19 to 1,842 at the end of FY20. Over the same period, monthly recurring revenue increased 52% to $5.7 million and annualised revenue grew 57% to $67.8 million. Profit margins are also increasing as growth in recurring revenue has outstripped growth in direct network costs.
Megaport has now delivered 17 consecutive quarters of growth in annualised revenue. The technology operator is due to report full year results on Wednesday 19 August which will give investors insight into its growth over the past year.
CEO Vincent English said: “Megaport has continued its strong growth momentum, with solid revenue results throughout FY20. The Megaport platform has enabled customers the flexibility to respond to their rapidly changing business environment.”
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Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends MEGAPORT FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd and LIVETILES FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Kogan.com ltd, LIVETILES FPO, and MEGAPORT FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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