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Why WAAAX shares like Afterpay (ASX:APT) and Xero (ASX:XRO) are surging

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WAAAX shares have rocketed higher in early trade. WiseTech Global Ltd (ASX: WTC)Afterpay Ltd (ASX: APT) and Xero Limited (ASX: XRO) shares are amongst the biggest gainers today.

Here’s why our favourite ASX tech shares on the move despite the S&P/ASX 200 Index (ASX: XJO) slumping at the open.

Why WAAAX shares like Afterpay are surging

I think the big factor was strong gains in offshore markets overnight. Wall Street ended the day higher despite volatility throughout the session. That was largely powered by tech-related stocks that rocketed higher.

As tends to be the case, the WAAAX shares have followed suit. These ASX tech shares have started the day strongly – at the time of writing the WiseTech share price is up 4.1% with Xero (+1.5%) and Afterpay (+3.1%) not far behind.

It looks like these Aussie tech shares will extend their gains after already being amongst the biggest winners in 2020.

ASX tech shares were hit hard in the March bear market as investors feared an economic downturn that would wipe out potential growth. It’s almost proved to be the opposite, with tech shares shining while other areas of the economy have faltered.

Is now a good time to buy?

ASX tech shares are expensive on a relative value basis right now. Some, like Afterpay, are trading on astronomical price-to-sales ratios. Many are yet to even turn a profit which could worry value-based investors.

However, there is still plenty to like about the WAAAX shares right now. Tech is one of those sectors that continues to operate given a strong reliance on online channels like cloud-based software or online retail.

I’m not bullish on ASX tech shares but I’m not willing to bet against further gains in 2020. 

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Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia owns shares of AFTERPAY T FPO and WiseTech Global. 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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