2 fast-growth ASX tech shares that are being sold off

ASX tech shares like Temple & Webster Group Ltd (ASX:TPW) and Redbubble Ltd (ASX:RBL) are being sold off right now.

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Over the last couple of weeks there are some fast-growth ASX tech shares that are being sold down.

Here are two examples:

Temple & Webster Group Ltd (ASX: TPW)

The Temple & Webster share price dropped 6.4% yesterday and it has fallen almost 25% since 25 January 2021.

The ASX tech share released its FY21 half-year result this week.

Temple & Webster reported that its revenue for the six months to 31 December 2020 went up by 118% to $161.6 million. Whilst mostly a consumer business, the company also reported that its trade and commercial division grew 89% year on year.

During the period, the number of Temple & Webster active customers went up 102% to 687,000. It recorded its first day of $3 million of checkout revenue, which was achieved in November.

Temple & Webster’s earnings before interest, tax, depreciation and amortisation (EBITDA) surged 556% to $14.8 million.  

The ASX tech share’s fixed cost as a percentage of sales decreased from 11.6% to 7.5%, which the company said demonstrated continued operating leverage.

Growth has continued in the start of the 2021 calendar year, with January’s revenue growth tracking in excess of 100%.

Temple & Webster said that it continues to experience strong tailwinds. It says that it’s benefiting from the ongoing adoption of online shopping to structural and demographic shifts. The company is seeing an acceleration of those trends due to COVID-19. Another tailwind is that there’s an increase in discretionary income due to travel restrictions. The final tailwind is the continued recovery of the housing market and unemployment levels.

It’s committed to growth, saying that it will continue its reinvestment strategy, investing into growth areas of the business to cement its online leadership and drive market share.

The CEO, Mark Coulter, commented that the operating leverage and profit growth will allow the company to invest into areas such as data, technology, private label and brand awareness.

Redbubble Ltd (ASX: RBL)

Since 25 January 2021, the Redbubble share price has fallen by around 9%.

The company hasn’t made any market sensitive announcements in 2021 yet. However, in October it gave a trading update for the first quarter of FY21.

The ASX tech share reported continuing growth on top of what was achieved in FY20. Excluding a positive adjustment relating to delivery times reverting back to more normalised levels, marketplace revenue rose by 98% to $139.3 million, gross profit increased by 118% to $59.6 million and it generated $17.2 million of earnings before interest and tax (EBIT).

The company is focused on four initiatives that it describes as key for generating ongoing profitable growth. The first area is artist acquisition, activation and retention. The next area is user acquisition and transaction optimisation. The third area is customer understanding, loyalty and brand building. The final area of focus is further physical product and fulfilment network expansion.

One of the physical product lines that Redbubble launched in FY20 was masks, which generated millions of dollars of revenue for the ASX tech share.

At the time of the FY21 first quarter update, Redbubble CEO Martin Hosking said: “The strategic priority for the group now is to ensure we extend the market leadership we have established. We intend to invest in the customer experience to improve loyalty and retention and ensure long-term higher levels of growth. The company has the resources to undertake the anticipated investments and margin structure to ensure it can do so while remaining profitable.”

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Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Temple & Webster Group Ltd. The Motley Fool Australia has recommended Temple & Webster Group Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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