As the reporting season wraps up, WAAAX shares have provided mixed outcomes.
Australia’s answer to the United States’ FAANG shares (Facebook, Amazon, Apple, Netflix, and Google), WAAAX consists of 5 ASX technology shares.
These are WiseTech Global Ltd (ASX: WTC), a logistics platform provider; Afterpay Ltd (ASX: APT), the buy now, pay later behemoth; and Altium Limited (ASX: ALU), an electronics design software provider. It also includes Appen Ltd (ASX: APX), which provides data used in training artificial intelligence (AI) systems, and Xero Limited (ASX: XRO), a cloud-based accounting software provider.
So how have WAAAX shares performed this reporting season? Let’s take a look.
Wisetech is navigating the evolving impacts of the COVID-19 pandemic on international trade. The logistics industry saw volatility and a marked slowdown across all transport modes in the pandemic’s early stages.
But signs of recovery emerged in mid-2020, and momentum has been improving. Wisetech grew revenue 16% to $238.7 million in 1H FY21, while underlying NPAT increased 61% to $43.6 million. The company declared an interim dividend of 2.7 cents per share (up 59%). This reflects a payout ratio of 20% of underlying NPAT.
Wisetech says COVID-19 has accelerated structural changes in the industry, providing a strong tailwind for the digitisation of global logistics solutions. Customer levels started to improve in mid-2020, and transaction numbers have since trended upwards.
The company is continuing to invest in product innovation to leverage the structural shift to digitising global supply chains. The long term strategy is to expand the CargoWise platform globally while improving profitability. Wisetech says it is on track to deliver $10 million in net cost reductions in FY21 and achieve a $20 to $30 million run-rate for FY22.
Afterpay saw significant growth during the 1H FY21, with underlying sales increasing to $9.8 billion. This was a 106% increase on the $4.8 billion in underlying sales reported in 1H FY20.
Increased adoption of online shopping by consumers in lockdown has helped bolster sales and customer numbers. Afterpay reported 13.1 million customers at the end of 2020, an 80% increase on the prior corresponding period.
The North American market is growing strongly with 8 million active customers, up 127% over the past year. Merchant numbers have also grown, up by 73% to 74.7k. Afterpay made a net transaction margin of $213.9 million during the half, equating to 2.2% of underlying sales.
Afterpay’s continued focus on global expansion has seen an increase in international markets’ proportion of total sales. International markets accounted for 34% of underlying sales in 1H FY20 but increased to 51% in 1H FY21.
Afterpay is now planning launches into Spain, France, and Italy, while also progressing its early-stage investment in Asia.
The company is also planning to enter the banking arena with a money management app, Afterpay Money. The app will include payments and savings and come with a linked debit card. New cards can be added to the digital wallet, and customers can even have their salary paid into the account directly.
Altium reported a 12% increase in its subscriber base for 1H FY21, but a 4% decline in revenue which was down to US$89.6 million. This followed eight consecutive years of double-digit revenue growth.
Altium says the decline reflects the economic slowdown caused by extreme COVID conditions in the US and Europe and a challenging post-COVID market in China. The company also undertook a hard pivot to the cloud during the first half but has reported early signs of growing momentum in the second half.
The company declared a dividend of 19 cents per share, down 5% from 20 cents per share for 1H FY20. Altium says that while there is emerging optimism thanks to the roll-out of COVID vaccines, it continues to view fiscal 2021 as a pre-vaccine year.
Therefore full-year revenue guidance is expected to be at the lower end of the range from US$190 million to US$195 million.
Appen maintained solid revenue growth in the full year to 31 December 2020. Revenues were up 12% to $599.9 million, which gave underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of $108.6 million.
Investments in sales and marketing yielded 136 new customers across a variety of sectors. Many are small, but Appen says they will increase its market penetration and lay a strong foundation for growth in coming years.
“2020 was a breakout year for new sales, new projects, committed revenue and our entry into China, but it was not without its challenges,” said Appen’s CEO Mark Brayan.
The company’s B2B selling was impacted by the move to working from home, which resulted in fewer customer wins in Q2 and Q3 before bouncing back in Q4.
Nonetheless, Appen declared a final dividend of 5.5 cents per share. Appen has advised that full-year underlying EBITDA for 2021 is expected to be in the range of $120 million to $130 million, representing growth of 18% – 28%.
Appen says it is in sound financial health with $78 million in cash and no debt at 31 December 2020.
Xero’s financial year ends on 31 March, after which we can expect its full-year results. Xero’s half-year results released in November showed a 21% increase in operating revenue despite challenging conditions.
Subscriber numbers grew to 2.453 million, a 396,000 increase year-on-year. Net profit after tax increased $33.2 million to $34.5 million.
Xero has been supporting customers through the pandemic with software enhancements reflecting government initiatives such as JobKeeper. The company’s strategic priorities are centred on driving cloud accounting and building for global scale and innovation.
Mixed results for WAAAX
The impact of the coronavirus pandemic on WAAAX shares has varied. Afterpay saw significant growth thanks to structural tailwinds. Altium, however, felt the impact of COVID conditions in the form of declining revenue.
WAAAX shares are now adjusting to the new normal and readying operations for a post-COVID world. Investors will be watching keenly to see how WAAAX shares adapt to this new operating environment.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Kate O'Brien owns shares of Altium, Amazon, Appen Ltd, and Apple. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Facebook, and Netflix. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Appen Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Altium and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool Australia owns shares of AFTERPAY T FPO, Altium, WiseTech Global, and Xero. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Facebook, and Netflix. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.