The Australian tech sector is still small and immature compared to the much larger US tech market. However, a broad range of ASX tech shares is now emerging. Many have strong growth prospects in my view.
WiseTech Global has not been among the top performing ASX shares in the past 12 months. After trending downward from $36.50 to $29.44 in mid February, the WiseTech Global share price then dropped to $10.48 in mid March. It then made a weak recovery, before rising sharply after its FY 2020 earnings release. Despite this strong rise, the ASX tech share’s share price is still trading well below where it was 12 months ago.
Despite lacklustre recent share price performance, I believe the long term growth potential for WiseTech Global remains solid. This ASX tech share recently provided a strong FY 2020 result in challenging market conditions due to the coronavirus pandemic. Total revenue grew to $429.4 million, up by 23% on the prior year, while EBITDA grew by 17%. Also, the integration of its recent acquisitions is progressing well. I am confident that WiseTech Global remains well-placed to grow on the back of an expanding global logistics market over the next five to 10 years.
In contrast to WiseTech Global, the Appen share price has risen strongly over the past 12 months. The ASX tech share’s price increase has been particularly fast since mid-March. This is despite an 11% fall in its share price yesterday, following the release of its full year financial results. The financial result to me looked solid in very difficult market conditions. Total revenue was up 25% to $306.2 million for FY 2020 and underlying EBITDA came in at $49.1 million, up 6%. Growth was strong in China, and Appen had key customer wins in the first half of FY 2020 in the US and Europe. I think the growth story for Appen is set to continue over the next few years, driven by the growing global demand for Artificial Intelligence products and machine learning markets.
Both WiseTech Global and Appen are ASX tech shares that I think have strong growth potential over the next five years. Both have entrenched market positions and an expanding global presence. This positions both companies for above average share price growth in the years to come.
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Phil Harpur owns shares of Appen Ltd and WiseTech Global. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of WiseTech Global. The Motley Fool Australia owns shares of Appen Ltd. 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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