Portfolio Immunity through Digital Disruption and Tech Titans

  • May 08, 2020 AEST
  • Team Kalkine
Portfolio Immunity through Digital Disruption and Tech Titans

With countries implementing lockdown and social distancing restrictions, people have been struggling to manage their work and incomes, while businesses are fighting to stay afloat during unprecedented times.

So, the question arises who is going to help people knock off this pandemic situation? The answer to this question undoubtedly lies in “Technology”.

Technology has been at the forefront aiding people to manage their work from home, attend official meetings or video conference via virtual tools like Zoom or Microsoft Teams. Besides, students have been learning via e-learning platforms, while people are increasingly relying on ordering essential items online, and entertainment via online streaming apps like Netflix, Amazon Prime.

But, what makes Technology companies so resilient against this COVID-19?

Quiet literally, technology has a hold across various sectors like media, health, retail, education, offering numerous services like video chat services, automation of devices, cloud computing and have precisely kept the desolated economies humming in a way that would have been impossible in the past. Technological adoption and adaptation seem to be a key strategy adopted by corporates to beat the changing market scenario.

Also, group of big US technology companies have showcased positive signs in pain, popularly known with acronym FAANG stocks — Facebook, Apple, Amazon, Netflix and Google parent Alphabet.

Looking at the price-to-book ratio of the FAANG stocks as on 7th May 2020, Facebook traded at 28.56c, Apple traded at 23.57x, Amazon traded at 112.32x, Netflix traded at a 93.25x. Alphabet (Google) traded at 27.16x.

Additionally, the Q1 2020 results hinted at FAANG players coming out stronger in comparison to the industries disrupted by the COVID-19 pandemic. Netflix reported increase in the number of new members amid lockdown with increase in ARPU and the positive repercussion expected to be seen in the coming quarters. Also, Apple made up for of its lost iPhone devices sales with digital services like App Store sales and streaming services.

With virus outbreak wreaking havoc at financial markets, market players have been adopting their prudent fundamental and technical analysis tapping potentially attractive themes at undervalued prices. The technology space has garnered limelight, well placed to support sluggish businesses in their technological leap and supporting new work and lifestyle culture.

The tech space seems to be blazing with the potential to shape the corporate future and value creation, while opening the door of opportunities to grow the businesses aggressively in a short span.

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S&P/ASX All-Tech Index Debut

On 21st February 2020, ASX launched the S&P/ASX All Technology Index (All Tech Index), in partnership with S&P Dow Jones Indices (S&PDJI) which went live on Monday, 24 February. This new index incorporates all the ASX-listed players belonging to the fast-growing technology space.

 

 

 

Interesting Read: Apple & Google Collaborate on COVID-19 Contact Tracing Technology

Moving forth, let’s have a look at the two ASX-listed technology stocks that gained considerable traction in terms of their robust positioning in the market.

Megaport Limited (AXS:MP1)

MP1 is a global provider of elastic interconnection services. MP1 enables customer to have flexible interconnection services via Software Defined Network (SDN). The company reported no major impact on business due to virus, stating it works ‘as a service’ business model.

MP1 recently published its results for the quarter ending 31 March 2020, with below key financial highlights:

  • Achieved a customer base of 1,777 customers with 6% QoQ growth.
  • Total revenue for the quarter increased by 10% to $15.19M (74% Y-O-Y).
  • Generated $5.4M of Monthly Recurring Revenue (MRR) with a Y-O-Y growth of 74%.
  • Reached a sum of 601 Enabled Data Centres with a Y-O-Y growth of 29%
  • Earned Average Revenue per Port of $1,008 with growth of 8% Q-o-Q.
  • Availability of $100 million cash, with no debt other than vendor finance of circa. $6 million.
  • $72.5 million raised via capital raising amounted. including $50 million under the institutional share placement.

 

MP1 traded at $14.410, up 6.7% on 8 May 2020 (2:43 PM AEST). The stock has provided a return of 29.53% over last one month.

ALTIUM LIMITED (AXS:ALU)

A multinational software company that provides PCB design software, PCB parts as well as data management software. ALU provides Altium Live, which is the fastest-expanding conference for PCB designers as well as engineers in the industry.

In its recent market update, ALU has reported solid operational and market position amidst the existing coronavirus scenario.

Mr Aram Mirkazemi, CEO said that the company’s operating model is flexible to the new normal created by contagious virus, with robust electronic design industry. Additionally, its marketing and direct selling takes place over the phone or through the internet amid COVID-19.

However, because of the uncertainty regarding the direction of health crisis, the company has decided to withdraw its guidance.

ALU’s management is rigid to its established ambitious market leadership goal of US$200 million for FY’20. Also, company plans to roll out Altium 365, its new cloud platform expected to be driving 100k subscribers by end of 2025. Altium 365 is expected to stipulate the rising demand for cloud-based collaborative tools across all sectors.

ALU traded at $36.620, up 1.4% on 8 May 2020 (2:43 PM AEST). The stock has provided a return of 18.62% over last one month.

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

Road Ahead

In a nutshell, stocks in technology space are serving as a lucrative option offering some resilience to the existing market turmoil.

Technology companies are blazing as they have the potential to shape the future. They can create value and demand, opening opportunities to exponentially grow their business in a short amount of time. They seem to be in better position to come out of this pandemic bigger and stronger.

 


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