Revenue up 400%: expert sticks by ASX share that's halved this year

After a year of turmoil, there are many stocks that have prices decoupled from actual business performance.

Many of us would now be holding ASX shares that have halved in value in just the first five months of this year.

The fact that so many growth stocks have suffered the same inglorious fate will be zero consolation to those everyday investors staring at a massive red percentage on their screen.

However, if you need strength to stay the course during such traumatic times, this might do the trick.

The fact is, many experts are saying, for many of those ASX shares, the stock price drops have nothing to do with the actual business performance.

"There is significant negative sentiment pervading almost all markets," Cyan Investment Management portfolio manager Dean Fergie said in a memo to clients.

"Unfortunately we cannot control the market's perception or fear — so we have to concentrate on the results being presented."

Here is one example that Fergie's C3G Fund holds:

boy and girl playing video game

Image source: Getty Images

Share price crashes while revenue rockets

Video games developer Playside Studios Ltd (ASX: PLY) managed to initially survive the rout of technology shares when the plunge started last November.

In fact, the share price hit an all-time high of $1.19 when trading closed on 11 February.

But since then the stock has almost halved, to close Wednesday at just 64 cents.

As far as Fergie's concerned, that has nothing to do with the health of the business.

"Playside had a huge quarter with revenues up 400% to $13.6 million with a decent contribution coming from their Beans NFT launch."

And with strong prospects, he's still backing the stock to bear fruit.

"Playside continues to drive strong results with both its own gaming IP and its work for marquee clients such as Activision Blizzard Inc (NASDAQ: ATVI). 

"The recent acquisition of Activision by Microsoft Corporation (NASDAQ: MSFT) has highlighted the corporate appeal of gaming companies."

So many buying opportunities out there

Fergie admitted rising interest rates, a federal election, and overseas events are all conspiring against small-cap growth stocks.

"Investors may remain wary for some time yet," he said.

"However, the very best buying opportunities occur when there is pessimism, fear and overwhelmingly negative sentiment, which appears to be the case currently."

While his team will not be able to "pick the bottom" better than anyone else, there are many opportunities out there already where the stock price has divorced from reality.

"It's clear that there are some increasingly evident gaps between price movements and underlying company performance and value."

Motley Fool contributor Tony Yoo has positions in Microsoft. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Activision Blizzard and Microsoft. The Motley Fool Australia has recommended Activision Blizzard. 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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