The Aussie WAAAX shares – the ASX’s answer to America’s FAANG shares – have started to see a divergence in share price performance. Afterpay Ltd (ASX: APT) and Xero Limited (ASX: XRO) look to be leading the pack, while Appen Ltd (ASX: APX), Altium Limited (ASX: ALU) and Wisetech Global Ltd (ASX: WTC) have struggled to maintain positive market sentiment.
A strong influence on the performance of S&P/ASX 200 Index (ASX: XJO) tech share prices is the Nasdaq Index. The last quarter finished in an extremely volatile fashion, with the Nasdaq hitting an all-time record high in September before falling sharply by a whopping 12%. This volatility was unavoidable for our WAAAX shares, which also experienced a sharp pullback in their share prices.
With that in mind, let’s take a look back at how the WAAAX shares performed in the quarter ended 30 September.
The Wisetech share price is still recovering from its short-selling attack, which started back in late 2019. This report was launched by J Capital, which labelled Wisetech a company with overstated profit, suspect European revenue growth and poorly integrated, underperforming acquisitions. The rapidly changing sentiment for Wisetech resulted in a significant sell off after the announcement of its 1H20 results back in February, with the company losing more than half its value in the following weeks.
Looking at the last quarter, Wisetech released an upbeat FY20 performance that resulted in its shares jumping some 35% from $21 to $28. Its FY20 results highlighted a sound performance with revenue increasing 23% to $429.4 million while underlying net profit and earnings per share (EPS) remained flat.
Wisetech Founder and CEO, Richard White commented:
COVID-19 market disruptions have provided a long-term tailwind for growing our market share as the need for digitalisation across global logistics execution market accelerates and significantly increases the value and demand for CargoWise. In FY20 we saw a number of our large logistics customers such as DHL Global Forwarding and DSV/Panalpina expand their global rollouts on the Cargowise platform.
Wisetech provided the following guidance for FY21, based on the assumption that market conditions do not materially change. It currently anticipates FY21 revenue growth in the range of 9% to 19% (representing revenue of $470 million–$510 million) and earnings before interest, tax, depreciation and amortisation (EBITDA) growth of 22% to 42% (representing $155 million–$180 million).
The Altium share price has staged a recovery in recent times following a challenging period with respect to its revenue and subscriber growth. Back in June, the company announced that it had pivoted to aggressively closing sales by discounting its products and offering extended payment terms. While this strategy was driving subscriber figures, the company advised that its revenues will likely be below analyst consensus. At the time, China was also experiencing its second wave of COVID-19 cases while an increase in cases in parts of the US was having some impact on Altium’s business performance.
These challenges were evidently reflected in the company’s FY20 results with revenue increasing 10% to $189 million, EBITDA increasing 13% to $75.6 million and profit after income tax falling 42% to $30.8 million. The company confirmed it remains committed to reaching its goal of 100,000 subscribers by 2025, having just passed the half-way mark. But due to COVID-19, its 2025 goal of reaching US$500 million in revenue may take an additional 6 to 12 months.
Despite a poor FY20 performance, the Altium share price has held its ground with a relatively flat performance in the last quarter.
The Afterpay share price is the gift that keeps on giving, hitting recent highs of more than $100 per share with the company posting a stellar quarterly update this week. It also recently announced a partnership with Westpac Banking Corp (ASX: WBC), which will continue to build out Afterpay’s financial service ecosystem and potential access to Westpac customer data.
However, the quarter ended 30 September was very unique for the Afterpay share price and buy now, pay later (BNPL) shares in general. Many BNPL shares started to soar in August and made repeated record all-time highs. In the case of Afterpay, it hit a record high (at the time) just shy of $96.00 on the day its full year results were released on 27 August.
The issue here was that much of the anticipated good news for BNPL shares and Afterpay had already been priced into expectations. Even though the company delivered triple digit growth in revenue, announced exciting expansions into the rest of Europe and opportunities in the Asian market, this was not enough for investors after its share price ran up more than 25% in mid-to-late August.
This, combined with the announcement that PayPal would be launching its own iteration of a BNPL product, resulted in a sharp sell-off that wiped much of Afterpay’s legendary August gains, making its share price go full circle back to the $70 level by mid-September.
Appen has experienced sharp sell-offs following its 1H19, FY20 and 1H20 results. This is somewhat uncharacteristic for the fast-growing artificial intelligence (AI) tech company.
Leading up to its 1H20 results, the Appen share price started to go vertical with a 20% run in just 9 trading sessions, hitting an all-time record high of $43.50. Its significant share price run up leading into earnings season, combined with the fact that its FY20 results were slightly below analyst consensus, resulted in a sharp sell-off and a flat performance over the quarter ended 30 September.
At face value, its 1H20 results were very strong with a 47% increase in revenue to $536 million and 32% increase in underlying NPAT. The company believes that it will continue its long-term growth trajectory in a high growth market that will accelerate post-pandemic. However, it did anticipate that COVID will have a small impact on its second half revenue and maintained its guidance of full year EBITDA to be in the range of $125 million to $130 million (representing a 23.7% to 28.7% increase).
The Xero share price has truly skyrocketed in recent times, almost touching the $120 mark in the past fortnight. Surprisingly, Xero has not announced any market sensitive news across the last quarter, besides the acquisition of Waddle, a cloud-based lending platform that helps small businesses access capital through invoice financing.
This acquisition positions Xero to partner with lenders globally to better serve small businesses’ working capital and other financial needs. The acquisition will be made with an upfront payment of $31 million and subsequent earnout payments based on milestones of up to $49 million.
Xero typically reports its full year results in early-to-mid November. It will be interesting to see if its results can surprise the market or if much of its performance has already been priced into its recent share price run.
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Motley Fool contributor Lina Lim 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, Appen Ltd and WiseTech Global. The Motley Fool Australia recommends shares in Xero. 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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