Technology sector could be the best bet at the moment 

Summary

  • The world economy is facing hardships due to the Great Virus Crisis (GVC) and uncertainties continue around the pandemic as the WHO says the virus is new, and the world is still learning about it.
  • With social distancing and self-isolation measures, humans are becoming more and more dependent on technology which will automatically lead to the IT sector's growth.
  • Consumer behavior is changing; people now prefer more of online shopping due to many restrictions at the store and the fear of getting the infection.
  • Many technology-related companies like ICT in edtech category and SPT in BNPL sector are showing growth during the Covid-19 crisis.

The world economy is going through a gloomy period due to the prolonged virus-related pandemic, and the relentless virus continues creating an awful history. On 12 June 2020, WHO reported 7,805,148 confirmed cases, with 431,192 confirmed deaths and around 216 Countries, areas, or territories with cases.

As per WHO, the virus is new, and there is much more we still don't know about it, and the research is going on to find out the extent to which an asymptomatic person can transfer the infection. Though, one thing is sure that testing and isolating the affected people have a crucial role in stopping the transmission.

Technology is part of our lifestyles like never before

Image source: pixabay

The new way of living - to practice social distancing and to isolate oneself has made human utterly dependent on technology. Only a few sectors are growing during such a challenging time, and technology is one of them as the crisis requires more evolved technologies to face unprecedented challenges.

All countries in the world are practicing social distancing, and less gathering as most of the world is affected by the virus. Countries which have seen its worst like China and the US are fearing the second wave of the infection. All these circumstances have pushed people to live inside their homes with work from home, shopping online, increased use of edtech to continue education and increase in the usage of high tech payment system like BNPL.

The technology-related sectors that are booming during the crisis are Artificial Intelligence, BNPL, cryptocurrency, cybersecurity, robotics, edtech, and others. If we look at S&P/ASX 200 Informational Technology (Sector) graph, on 23 March 2020, it was at 847.86 and by 15 June 2020, it increased to 1,455.48.

Consumer behaviour is changing during the crisis

When the country entered the lockdown period, nobody knew how long it would take to again resume to normalcy. Now the economy is reopening with safety measures, but the uncertainties are still there. The crisis has completely reshaped the retail industry, stores are open, but only a few people can be inside the store at a single time, these restrictions combined with the psychological fear of catching the infection, pave the way for the growth of the digital stores.

Now, gradually retailers in the country are witnessing a surge in online stores' sales, which is automatically pushing them to develop their online platforms to provide the best customer experiences. Also, retailers like AuMake International Limited (ASX: AU8) are providing BNPL services to customers.

With the crisis progressing towards the much-awaited end, we are entering a high-tech world. In such disruptive times, the technology sector could be the best bet in the market as post the crisis; everything will be changed from consumer behaviour to the way businesses were being operated before the pandemic.

On that note, let's discuss a few tech-related stocks here:

iCollege Limited (ASX: ICT)

The company is in the global education sector and offers a wide range of product and services. ICT comes under edtech category, and it is expecting more support for the industry in the coming weeks as National Cabinet is now focused towards economic recovery. As per the company, they provide a healthy and safe way of education, and since Australia has responded well to the pandemic, so Australia can be the preferred place for pursuing study once the borders reopen with strict guidelines.

Here are the latest financial updates from ICT:

ICT had actual cash receipts of AUD 1.16 million for May as compared with expected cash receipts of worth AUD 751,000. The Company includes receipt of the AUD 224,000 loan from QRIDA (Queensland Rural and Industry Development Authority).

Sero Institute (International Student RTO) expected cash receipts of AUD 360,000 but received actual cash receipts of AUD 474,000 for May.

The Company expected cash at bank to be AUD 396,000, but the real cash at bank was AUD 521,000 at the end of May.

Managing Director Ashish Katta said that the company responded well to the pandemic related challenges. While the revenue in June quarter has been impacted, the company is well-positioned for the remainder of the year.

ICT share ended 15 June at AUD0.034, with a market capitalisation of AUD 18.03 million.

Splitit Payments Ltd (ASX: SPT)

Splitit offers a BNPL payment system in which customers can pay through their existing debit or credit card, and Splitit splits the cost into the fee and interest-free monthly payments.

The company has a robust performance thanks to growing shift to eCommerce; also, more consumers are using SPT's BNPL payment system as large new retailers have alliances with the company in 2020.

SPT has delivered MSV (merchant sales volume) of USD 25.8M in May 2020 (USD 310M annualised), reflecting 321 per cent growth compared to May 2019. Supported by the company's strong partnership with global eCommerce giants, North America figures revealed an upward movement by 336 per cent, and Europe was up by 548 per cent in May 2020 as compared to May 2019.

Total merchants grew to 12% reaching 964, and average order value increased to USD 939 in May 2020.

CEO Brad Paterson said due to high growth in May; the company has delivered the highest monthly MSV to date, which is more than USD 25M. It resulted as a large number of merchants were onboarded, and now with the eCommerce expansion accelerating, there is still strong demand for merchants.

On 15 June 2020, SPT traded at AUD 0.615 with a market cap of AUD 239.6 million.

When all other sectors are waiting for things to get routine and the businesses to operate as before, the technology sector is riding high on pandemic related challenges and expected to grow substantially post the epidemic.


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