ASX tech shares are really good businesses to consider for long-term investments in April 2021.
Technology businesses usually have a lot of growth potential and they can also have higher profit margins than some other industries as well.
Not every business may be trading at very attractive value, but it could be the right time to think about these two:
Redbubble Ltd (ASX: RBL)
The Redbubble share price has fallen 12% since 16 March 2021 and it’s down 24% since 15 February 2021.
That decline has happened despite Redbubble reporting a high level of growth in its FY21 half-year result where marketplace revenue grew 105% in constant currency terms, gross profit went up 127% in constant currency terms and earnings before interest and tax (EBIT) rose by $44 million to $42 million. It also generated $80 million of operating cashflow.
Redbubble describes itself as a leading print-on-demand marketplace for independent artists – the number of artists on Redbubble marketplaces increased 76% year on year to 572,000 and customers grew 69% year on year to 6.2 million, spending $442 million of gross transaction value – up 90% year on year.
The broker Morgans currently rates the Redbubble share price as a buy and has a price target of $6.64 on the ASX tech share.
One area of growth that Redbubble is seeing is that sales through apps are growing rapidly (up 163% year on year) and attracting loyal users. App sales represented 14% of total marketplace revenue in HY21.
Redbubble believes that 2021 is a year of opportunity, it said:
Redbubble is positioned to build on a decade of momentum and aggressively pursue the global opportunity presented by the shift to online activity and increasing adoption of e-commerce platforms.
Kogan.com Ltd (ASX: KGN)
Kogan.com is another e-commerce business that is seeing high levels of growth, yet the Kogan.com share price has fallen 11% since 19 March 2021 and it’s down 42% since January 2021.
The ASX tech share’s growth is slowing compared to the even higher levels of improvement that the company was seeing during 2020 through COVID-19, but it is still seeing elevated double digit growth.
In January 2021, Kogan.com saw gross sales increase by 45% year on year with 111.6% growth of Kogan.com marketplace. There were some declines in verticals like travel and insurance (including travel insurance and certain other insurances which remain suspended).
Even so, gross profit was up 102% year on year and adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) was up 90% year on year in January 2021.
The above growth rates are not as fast as the first half of FY21 which showed gross sales growth of 97.4% and net profit after tax (NPAT) growth of 164.2%.
Kogan.com is displaying good network effects and scalability.
The Kogan First membership represents a large and growing community of loyal customers. The ASX tech share explains that these members purchase on average much more than non-members.
In the HY21 result, Kogan.com saw the gross margin improve from 22.7% to 27.3%, whilst the EBITDA margin increased from 7.6% to 9.4%, despite a large increase in marketing costs.
According to Commsec, the Kogan.com share price is valued at 18x FY23’s estimated earnings.
Where to invest $1,000 right now
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More reading
- 2 highly-rated ASX growth shares to buy
- 2 ASX dividend shares to buy in April
- $10,000 invested in the Kogan (ASX:KGN) IPO is worth how much today?
- Got money to invest? Here are 2 ASX shares to buy
- Is Temple & Webster (ASX:TPW) the best e-commerce ASX share to buy right now?
Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia has recommended Kogan.com ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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