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Finding High-Quality Tech Stocks on ASX 200: APT, APX, XRO, ALU

  • April 20, 2020 02:16 PM AEST
  • Team Kalkine
Finding High-Quality Tech Stocks on ASX 200: APT, APX, XRO, ALU

In 2019, the S&P/ASX 200 Information Technology ranked amongst the best performing sectors. During that time, the sector index comfortably surpassed its benchmark index S&P/ASX 200. Even in the current scenario where the economies have come to a standstill because of the COVID-19 pandemic, the sector index has fared better than the benchmark index (YTD return of -12.98% compared to benchmark index’s -17.90% as on 17 April 2020).

Gold MTF non-AMP

However, the situation has improved in the past couple of weeks. Glancing at the performance of the Information Technology sector for April 2020 till date (17 April 2020), the sector has delivered a return of 15.87%. The sector bounced back from 24 March 2020 and continues to follow an upward trend.

Looking at the recent trend, investors might find the sector attractive and might be interested in knowing some of the high- quality stocks forming a part of it. Let’s have a look at four such stocks.

Afterpay Limited (ASX:APT)

Afterpay Limited is a technology-driven payment company. The company enable leading retailers to offer their customers the ‘buy now pay later’ service.

The shares of Afterpay Limited delivered a negative YTD return of 5.32% (as on 17 April 2020). However, in the last one month, the shares have delivered an impressive return of 52.15%. The APT shares were trading at $28.790 on 20 April 2020 (01:15 PM AEST), down 0.724% from its previous close.

The company, in its recent announcement on 14 April 2020, demonstrated strong performance across its business with underlying Year To Date sales of $7.3 billion, representing a surge of 105% as compared to the previous corresponding period (pcp).

March 2020 was APT’s third-biggest underlying sales month ever recorded.

Image Source: APT's Report

Net Transaction Margin on an FY2020 YTD basis was ~2% (unaudited) and in line with 1H FY2020. The mature ANZ region remained a highly profitable region, and the underlying cash flow remained positive.

The balance sheet of the company continues to be robust and APT confirmed that there is no need to raise any capital. The total cash of the company as on 31 December 2020 was $541.1 million.

Appen Limited (ASX:APX)

Appen Limited provides training data to its clients who are engaged in launching world-class Artificial Intelligence. The shares of Appen delivered a YTD return of 11.45% and 23.85% in the last one month (as on 17 April 2020). The APX shares were trading at $24.740 on 20 April 2020 (01:15 PM AEST), up 0.081% from its previous close.

In the recent announcement on 15 April 2020, the company confirmed that its customer delivery and support were not impacted during the COVID-19 crisis. Also, all its staff are operating safely and productively from the remote location. However, its skeleton crews are available at the secure facilities and personnel in China have returned to office.

The company reconfirmed its full-year 2020 underlying EBITDA guidance to lie in between $125 million and $130 million.

In FY2019 ended 31 December 2019, the company reported 47.1% growth in its revenue to $535.999 million and a marginal drop of 0.3% in its net profit to $41.611 million. APX declared a dividend of 4 cents which was paid on 20 March 2020.

Xero Limited (ASX:XRO)

Xero Limited provides online accounting software for small companies. The shares of Xero delivered a negative YTD return of 1.15% while in the last one month, the shares have generated a return of 6.74% (as on 17 April 2020). The XRO shares were trading at $78.400 on 20 April 2020 (01:15 PM AEST), down 0.545% from its previous close.

Recently, the company made two big announcements:

  • On 8 April 2020, Xero launched Xero HQ Payroll to support advisors during the COVID-19. The new payroll features offer understandings into Single Touch Payroll compliance so advisors can assist their small businesses to use their data to get access to the stimulus programs announced by the Government.
  • On 18 March 2020 XRO announced the integration of Hubdoc into the Xero platform. Hubdoc was acquired by XRO in 2018 and was offered to the customer as a standalone add-on. It plays an essential role in accelerating XRO’s vision for intelligent automation & code-free accounting. The integration would provide more value to small business customers as well as advisors globally.

In 1H FY2020 ended Xero reported 32% growth in its revenue to NZ$338.658 million. The company made a net profit of NZ$1.336 million.

Image Source: XRO's Report

Altium Limited (ASX:ALU)

Altium Limited is the foremost provider of PCB design software, PCB parts as well as data management software in the world. It is the host of AltiumLive, which is the fastest-expanding conference for PCB designers as well as engineers in the industry.

The shares of Altium delivered a negative YTD return of 5.79% (as on 17 April 2020). However, in the last one month, the shares have generated a decent return of 22.54%. The ALU shares were trading at $32.270 on 20 April 2020 (01:15 PM AEST), down 0.247% from its previous close.

Recently on 8 April 2020, the company released an announcement where it confirmed solid operational and market position in the existing coronavirus situation. However, because of the uncertainty regarding its direction, the company decided to withdraw its guidance. The management of the company stays firm to its established ambitious market leadership goal of US$200 million for FY2020.

Altium’s CEO Mr Aram Mirkazemi stated that the company’s operating model is robust & is extremely flexible to the new global situations. The reason behind this is the marketing and direct selling taking place over the phone or through the internet.

He also stated that at the industry level in the present scenario, the electronic design is holding up reasonably well. This is possible as engineers utilise additional time as well as capability from the slowdown in manufacturing as well as a supply chain to respond to prototype designs.

The company would also be rolling out Altium 365, which is its new cloud platform. The need for rolling out Altium 365 is the rising demand for cloud-based collaborative tools throughout all sectors as well all areas. Altium 365 is the primary enabler of ALU’s approach of industry transformation via market supremacy & it would assist in driving 100k subscribers by 2025. Altium 365 is relevant to situations that are evolving under COVID-19. It facilitates engineers to operate from any location and link with anybody.

Further, the company has plans to speed up the rollout of online/high volume selling approach. This will significantly expand the inside sales capacity to support the drive through Q4 and ahead.

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