Despite technology shares getting hit hard in the pre-Christmas market rout, the start of a new year has indicated to investors that this sector is still one to watch in 2019.
Here are three explosive growth technology shares that may be worth looking at:
XERO Limited (ASX: XRO)
Xero is a New Zealand based software company that offers a cloud-based accounting software platform for small and medium-sized businesses.
The Xero share price has increased ~11% since the start of January to $46.84 (at the time of writing). Xero continues to focus on growing subscriber numbers for its small business platform, currently at 1.6 million users. The company is not expected to turn a profit until FY2020 but the large subscription base should allow it to start increasing pricing margins, with not many consumers likely to consider changing accounting software regularly.
Afterpay Touch Group Ltd (ASX: APT)
Afterpay Touch Group is a technology-driven payments company with a ‘buy now, receive now, pay later’ service that does not require end-customers to enter into a traditional loan or pay any upfront fees or interest.
The Afterpay share price has increased ~42% since the start of January to $17.70 (at the time of writing) but is still below its all-time high of $23. Whilst current earnings do not reflect the current share price, if the company successfully expands into the United States then it could be a star of the future.
Altium Limited (ASX: ALU)
Altium Limited is a software company that provides PC-based electronics design software for engineers who design printed circuit boards.
The rise of smart connected devices or “Internet of things” has seen the demand for printed circuit boards increase substantially over the past few years. This is a trend that is set to continue and Altium’s management has indicated that the company expects to be “market-dominant” by 2020. This rhetoric is backed by significant upside in EPS forecasts moving forward but it currently trades at an expensive P/E of 56.
The Altium share price has increased ~23% since the start of January to $26. 78 (at the time of writing).
And the key takeaway?
Whilst these 3 ASX tech companies have fantastic growth runways, they may be considered high-risk options. Considering the sky-high P/E ratios, partly due to the recent bullish cycle, it may be wise to wait for a pullback before dipping in.
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