The OFX (ASX:OFX) share price slumps with ASX tech stocks after posting its results

The OFX Group Ltd Fully Paid Ord. Shrs (ASX: OFX) share price wasn’t invited to the morning rally after it posted its profit results.

But it may not only be earnings news that’s holding back the stock as the S&P/ASX 200 Index (Index:^AXJO) jumped by around 2%.

Hopes that a COVID‐19 vaccine is just around the corner is fuelling today’s bull run. This means the ASX stocks that benefitted the most from the pandemic are copping the biggest hit and vice-versa.

ASX tech stocks on the nose

This explains why the Afterpay Ltd (ASX: APT) share price and Kogan.com Ltd (ASX: KGN) share price are among the biggest losers at the time of writing.

Some of the negativity towards tech and online stocks may be casting a shadow over the OFX share price, which fell 2.7% to $1.29.

OFX share price dragged by big profit and dividend hit

The fintech’s half year result didn’t help either with management posting a near two-thirds crash in underlying net profit to $2.9 million.

The foreign exchange platform certainly wasn’t much of a winner from COVID-19. Management blamed a sharp drop in transactions in February and March when the pandemic hit for the dismal result.

The drop in earnings forced OFX to slice its interim dividend to $0.81 from the $2.35 a share it paid this time last year.

Silver-lining for the OFX share price

The weakness is largely driven by its consumer business, although its B2B transactions held up better.

The number of new corporate clients improved 10.6%, while revenue from online sellers outside of Asia surged 52% in the half.

This helped support turnover, which dipped 2.7% to $11.2 billion in the six months to end of September this year.

Is the outlook for OFX improving?

Management also told the market that it thinks the worst is over. It noted that transactions bounced by 10.1% across all its business segments in the second quarter of FY21.

OFX attributed the recovery to “a sustainable business model and good execution of its strategy”.

It’s also counting on its new strategic partnership with WiseTech Global Ltd (ASX: WTC) to contribute to future growth.

Lack of guidance will weigh

The reassurances would have meant more if not for the fact that OFX shied away from providing any guidance.

“With the near-term revenue outlook difficult to predict and continued sensible investment in our growth engines, as previously indicated we will not be targeting positive operating leverage for FY21,” said OFX’s chief executive Skander Malcolm.

“That said, we continue to see a good recovery in trading underpinned by strong cash flows, while our growth investments position us well going forward.”

More reading

• Markets volatile on US presidential election results
• The 5 best-performing ASX 200 shares so far this year
• ASX 200 hits 8-month high. Here’s why we could go higher from here
• ASX 200 to surge higher after Pfizer COVID-19 vaccine success
• 5 things to watch on the ASX 200 on Tuesday

Brendon Lau has no position in any of the stocks mentioned. Connect with me on Twitter @brenlau.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO and WiseTech Global. The Motley Fool Australia has recommended Kogan.com ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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