Nasdaq is up, ASX200 Information Technology Index is few points away, why so?

  • Jun 11, 2020 AEST
  • Team Kalkine
Nasdaq is up, ASX200 Information Technology Index is few points away, why so?

Summary

  • Coronavirus pandemic has brought a paradigm shift in the way people work nowadays. This shift was witnessed globally, and technology sector has been playing a defensive role in it, bringing the digital wave.
  • Nasdaq Composite index closed at 10020.35, up by 0.67%, on 10 June 2020, with the impressive performance of various technology stocks. On home front, XIJ is a few points away in having the same sort of mojo of hitting an all-time high.
  • Stocks like XRO, ALU, APX and REA have been swaying on the ASX with their robust financial results, and COVID-19 proof performance, albeit with a couple of hiccups.

The impact of COVID-19 on the stock market has been similar to black swan that caught almost everyone by surprise and had potentially impacted the businesses across numerous sectors.  Moreover, the virus swallowed the growth made by economies and sectors so far. However, sectors like healthcare and technology fared decently during the crisis period, and several opportunities were explored with outbreak of the virus.

Technology played at the front foot and supported other businesses amid the crucial period. As most businesses and educational institutions were shut, demand for e-learning, online business platform, cybersecurity, and virtual business meeting applications were on the rise, and were being met by the technology companies.

Post-crash, stock market such as Nasdaq started to recover and how.

Recently, Nasdaq Composite index bounced back in the game perfectly and has rallied to record new highs in the last two days. Nasdaq stormed higher and closed at 10020.35 points, after hitting a high of 10086.89 intra-day, as on 10 June 2020. The current rally has a contribution from tech titans such as Apple and Amazon with an increase in their share prices at Nasdaq by 2.57% and 1.79%, respectively, on the same day.

Did you read; NASDAQ surged up above 10,000 points – Tech stocks setting a new benchmark

Of late, S&P/ASX 200 Information Technology (Sector) does not have the same mojo. However, it is a few points away from hitting its all-time high.

Globally, technology stocks are performing fairly well. However, the same enthusiasm is not witnessed in the Australian Information Technology index. Currently, S&P/ASX 200 Information Technology (Sector) (ASX:XIJ) is a few points away from its all-time high of 1604.40 points, noted in February. XIJ closed at 1504.7 points, down by 2.49% from its last close, as on 10 June 2020, after hitting a high of 1549.30 points during the day.

Did you read, 6 ASX Stocks creating a buzz!

Let us now see how well are the major stocks performing.

WiseTech Global Limited (ASX:WTC);

A logistics software company, providing cloud-based solutions globally, WTC has a strong business position with a robust balance sheet and significant liquidity. WTC’s net cash position as on 31 March 2020 was AU$ 230 million, along with an undrawn debt facility of AU$ 190 million.

WTC has reaffirmed its FY’20 guidance on 22 April 2020, as following:

  • Revenue is anticipated between AU$ 420 million - AU$ 450 million (growth of 21% - 29%)
  • EBITDA is expected in the range of AU$ 114 million - AU$ 132 million (growth of 5% - 22%).

Recently on 28 May 2020, WTC renegotiated earnout deals for numerous strategic acquisitions, with the objective to embrace better positioning of resources and boost its balance sheet.

These negotiations by WTC resulted in-

  • Reduction of contingent liabilities to AU$ 68.5 million from AU$ 215.5 million
  • Future contingent cash liabilities removal worth AU$ 151.5 million
  • Equity issuance of AU$ 81.4 million out of which AU$ 45.7 million remains escrowed for twelve months.

WTC shares traded at AU$ 21.900 on 11 June 2020, down by 2.276% from its previous close. WTC delivered a return of 12.90% during the period of past 30 days to its shareholders.

Xero Limited (ASX:XRO)

The provider of online accounting software for small businesses, XRO was focussed on supporting customers during COVID-19 and released new search functionality on its app marketplace along with the introduction of new tax and compliance tools in the month of June.

XRO reported top-line growth of 30% on pcp and impressive growth of 88% y-o-y in its EBITDA, for the quarter ending 31 March 2020. Also, XRO achieved its first FY NPAT of NZD 3.3 million, an improvement of NZD 30.5 million relative to NZD 27.1 million losses in FY19.

Source: Company’s announcement

XRO’s stock ended the day’s session at AU$84.77, decreasing by 0.271% on 11 June 2020. Also, XRO delivered a one month return of 2.48% to its shareholders.

Altium Limited (ASX:ALU)

A global software company, ALU is well-positioned operationally and commercially, with a strong balance sheet having a cash balance of over USD 77 million. However, the prolonged restrictions induced by coronavirus crisis are likely to impact ALU. Also, the cash preservation priorities of SMEs are expected to affect the timing of closing sales in the strongest months (May and June) of the year.

The Company has launched attractive pricing, and extended payment terms to accelerate volume in the challenging market conditions and has paced up the introduction of its new digital online sales capability. Despite the fact that the digital sales model will take time to speed up, ALU remains on track to climb the ladder of reaching the target of 100k subscribers by 2025.

ALU share price stood at AU$34.180, with an increase of 0.382% by the end of the trading session, as on 11 June 2020. ALU has a market cap of AU$4.46 billion and delivered a monthly return of -7.45% to its shareholders.

Did you read, 2 IT stocks at lifetime highs and with a positive outlook - Appen, Altium

Appen Limited (ASX:APX)

APX provides high-quality training data, used for machine learning and Artificial Intelligence.

The Company has robust balance sheet with cash resources of over AU$ 100 million. Recently, APX reaffirmed its guidance for FY’20 with YTD revenue plus orders in hand for delivery of ~ AU$ 350 million at May 2020 and EBITDA for the year ending 31 December 2020 is expected to be in the range of AU$ 125 million - AU$ 130 million.

On 11 June 2020, APX ended the day’s trade at AU$ 29.620, up by 2.032% from its last close. APX has a market cap of AU$ 3.53 billion. Also, APX’s P/E ratio was noted at 82.280x, and the annual dividend yield at 0.31%

REA Group Limited (ASX: REA)

An Australian entity, REA, offers both property and property-associated services, via online, as well as mobile apps throughout the regions of Asia and Australia.

REA has a robust balance sheet and low debt levels along with the cash balance of AU$135 million at the end of 30 April 2020. Furthermore, the Group has also strengthened its liquidity position by signing an additional loan facility, with the existing banking syndicate worth AU$149 due to be matured by December 2021.  

REA delivered its nine months performance for FY20 results in challenging market conditions and hence, its revenue after broker commissions amounted AU$ 640.2 million, reflecting a fall of 4% and free cash flow witnessed a decline of 14% and stood at AU$195.2 million.

During the period of nine months, the Company gained strong cost management and efficiencies with the help of organisational realignment, which resulted in a 5% reduction in total operating expenses.

REA also highlighted that the real estate market had been negatively impacted due to the social distancing norms and closure of businesses, along with uncertainty surrounding pandemic.

Owing to softening in new listing volumes, as well as measures undertaken to support customers during this time of virus, the Company expects its revenue to get negatively impacted. Therefore, REA is implementing various cost-saving initiatives like workforce planning measures, reduced marketing spending and supplier agreements evaluation.

REA’s share price declined by 3.272% and stood at AU$ 104.060, at the end of the market session, as on 11 June 2020. REA delivered a monthly return of 15.11% to its shareholders.

 


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