Category: Stock Market

It certainly was a fantastic month for the Vulcan Energy Resources Ltd (ASX: VUL) share price in January.

The clean lithium-focused mineral exploration company’s shares rocketed 186% higher over the month.

This latest gain means the Vulcan Energy share price is now up a remarkable 3,800% since this time last year. 

Why did the Vulcan Energy share price rocket 186% higher in January?

There were a couple of catalysts helping to drive the Vulcan share price materially higher in January.

One of those was the improving outlook for lithium prices and demand thanks to President Biden’s policies on renewable energy and the growing adoption of electric vehicles.

This has given the whole lithium sector a major lift in recent months.

What else drove its shares higher?

Another catalyst is company-specific and involves the release of Vulcan’s Pre Feasibility Study (PFS) this month for its Zero Carbon Lithium Project.

This project is home to Europe’s largest lithium resource, located in the Upper Rhine Valley of Germany.

According to the study, the Zero Carbon Lithium Project has the potential to be a cutting edge, combined renewable energy and lithium hydroxide project, in the centre of Europe, with net zero carbon footprint.

The study estimates that the project has an after tax net asset value of 2.25 billion euros. This equates to approximately A$3.5 billion and is considerably more than its current market capitalisation.

Management plans to use its unique Zero Carbon Lithium process to produce both renewable geothermal energy, and lithium hydroxide, from the same deep brine source.

In doing so, it believes it will be addressing EU market requirements for lithium by reducing the high carbon and water footprint of production, and total reliance on imports, mostly from China.

Ultimately, it believes its resource can satisfy Europe’s needs for the electric vehicle transition, from a zero-carbon source, for many years to come.

Though, it will be some time before it is doing that. If everything goes to plan, management is aiming to have the project operational in 2024.

More reading

• Bright day for Sun Cable after inking giant solar farm development deal
• What’s with the Vulcan (ASX:VUL) share price today?
• The Piedmont Lithium (ASX:PLL) share price just rocketed 32% to a record high
• Zip and Vulcan were among the most traded ASX shares last week
• Why Booktopia, Nitro, Reliance, & Vulcan shares are charging higher

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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Rural Funds Group (ASX: RFF) could be one of the most compelling ASX dividend shares available to Aussie investors.

Rural Funds is a farmland landlord operating through a real estate investment trust (REIT) structure.

Here are three reasons why Rural Funds could be considered as such a strong ASX dividend share:

1: Diversification

Owning Rural Funds shares isn’t like owning one farm in one location. Its properties are spread across five sectors: cattle, cropping (cotton and sugar), vineyards, almonds and macadamias.

Not only are the farms diversified by farm type, but they are also spread across different states and different climactic conditions. So far, its farms are located in five different states.

The recent tough drought period has shown why being located in different conditions is important, though none of Rural Funds’ farms were in the worst-hit areas. However, Rural Funds does own a significant number of water entitlements for tenants to use.

Rural Funds doesn’t carry any of the operational risks of the farms, that’s on the tenant.

The ASX dividend share recently announced that it was acquiring a 21,600 ML medium priority lower Fitzroy River water allocation for $32.4 million. The water will be sourced from the Rookwood Weir, which is being constructed 66km south-west of Rockhampton. This water will be applied to the development of up to 2,500 hectares of macadamia orchards and development of irrigation for cropping and cattle production.

2: Long rental contracts with quality tenants

One of the statistics to look at with REITs is the weighted average lease expiry (WALE).

That essentially means: how long does the average rental contract have left to run within the portfolio? The longer the WALE, the more income visibility and stability that the REIT has to offer.

According to Rural Funds, at 30 June 2020 (which was the end of FY20) its WALE was 10.9 years. Almonds, macadamias and cattle are the sectors with the longest leases. There are some almond farm leases that go to 2038.

3: Rental growth leading to distribution growth

Rural Funds is a particularly strong ASX dividend share because of the consistent distribution growth that it’s able to achieve. Management aim to increase the distribution by 4% per annum.

It has successfully increased its distribution by 4% each year since it listed several years ago.

Rental increases are built into the rental contracts. At the end of FY20, 41% of the rental income was subject to fixed annual rental increases of 2.5% with market reviews. Another 4% of the rental income is subject to just a fixed 2.5% annual increase per annum.

Then the next 46% of rental income has CPI linked rental increases, with another 7% being linked to CPI inflation with market reviews. The final 2% is classified as ‘other’.  

The other key way that Rural Funds achieves distribution growth is through investing in productivity improvements. For example, for cattle properties it has improved farms with water points, pasture improvements and cultivation areas. For the cropping properties it has invested in water storage and irrigated cropping.

Current yield

At the current Rural Funds share price, it has a forward FY21 distribution yield of 4.6% based on distribution guidance of 11.28 cents per unit. Another 4% increase of the distribution in FY22 would mean a yield of 4.8%.

More reading

• 3 ASX dividend shares with yields above 4%
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• 3 ASX dividend shares with large yields and consistent payouts

Motley Fool contributor Tristan Harrison owns shares of RURALFUNDS STAPLED. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. 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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Are you looking to add some exposure to the small side of the market to your portfolio? Then you might want to get better acquainted with the ASX shares listed below. 

Here’s why these small cap ASX shares could be ones to watch:

MyDeal.com.au Limited (ASX: MYD)

MyDeal.com.au is an online retail marketplace. Thanks to the shift to online shopping, which has accelerated because of the pandemic, MyDeal has been growing very strongly over the last 12 months. For example, MyDeal’s first half gross sales increased 217% over the same period last year to $126.7 million. This was driven by a strong increase in active customers to a record 813,764 and repeat use.

PlaySide Studios Limited (ASX: PLY)

PlaySide Studios is one of the largest independent video game developers in the country. Its portfolio includes games based on its own original intellectual property and games developed with Hollywood studios. The latter comprises titles relating to Jumanji, The Walking Dead, Batman, Superman, Teenage Mutant Ninja Turtles, and Disney Pixar’s Cars. In FY 2020, the company delivered a 55% increase in revenue to $7 million. This is only a fraction of the global mobile games market which is estimated to be worth $77.2 billion per annum.

SILK Laser Australia Limited (ASX: SLA)

As its name implies, SILK Laser is a laser, skin care, and cosmetic injections company. It has been a strong performer in FY 2021 despite the pandemic. As of the end of the first five months of the financial year, its unaudited network cash sales were up 63% on the prior corresponding period to $38 million. This means the company is on track to beat its forecasts for the year. Looking ahead, management sees plenty of room for growth. At present, SILK has a total of 53 clinics in operation, but management intends to grow its network by 6 to 10 new clinics per annum up to a total of approximately 150 clinics.

More reading

• 4 growing small cap ASX shares to watch
• Why Afterpay, Ansell, MyDeal, & PolyNovo shares are storming higher today
• Here’s why the MyDeal (ASX:MYD) share price surged 7% higher today
• 2 very exciting small cap ASX shares to watch
• 2 buy-rated small cap ASX shares for your watchlist

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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The Zip Co Ltd (ASX: Z1P) share price was on form in January and surged higher.

In fact, the buy now pay provider’s shares were the best performers on the S&P/ASX 200 Index (ASX: XJO) with a 37.4% gain.

Why did the Zip share price rocket higher in January?

Investors were buying Zip shares in January following the release of its second quarter update.

As you might have guessed from the share price reaction, Zip delivered a very positive update which revealed further strong growth across both its ANZ and US operations.

According to the release, for the three months ended 31 December, Zip delivered a 103% increase in transaction volume to a record of $1.6 billion. From this, the company generated an 88% increase in quarterly revenue to $102 million.

A key driver of this growth was its exceptionally strong performance during the month of December.

During the month, Zip posted monthly transaction volume of $628.4 million. This was a 104% increase over the same period last year and annualises to transaction value of over $7.5 billion.

The majority of this growth came from the key US market. 

Zip’s QuadPay business recorded a 217% increase in second quarter transaction volume to $673.1 million. This was underpinned by a 180% lift in customer numbers to 3.2 million and a 655% jump in merchants to 8,400.

Supporting this was its ANZ business, which recorded a 60% increase in transaction value to $908.7 million. ANZ customer numbers grew 39% over the prior corresponding period to 2.5 million and merchants lifted 43% to 30,100.

Another positive that went down well with investors was its bad debts metric in the ANZ market. Its net bad debts decreased from 2.43% to 1.93% over the three months, which was in line with management’s expectations. Monthly arrears in the ANZ market remain steady at 0.95%.

Zip’s Managing Director and CEO, Larry Diamond, was pleased with the quarter and appears confident on the company’s growth trajectory.

He said: “We are extremely pleased to deliver another exceptional set of numbers with the quarter really delivering a significant step change for the Company, confirming our position as one of the fastest growing players in the sector.”

Adding that Zip is “extremely well placed to continue this momentum into 2021 as the global shift away from the broken credit card model continues.”

Zip will be releasing its half year results in the coming weeks and providing more colour on its financials. All eyes will be on the Zip share price when that is released. 

More reading

• 3 reasons to consider Sezzle (ASX:SZL) at this share price
• Zip and Vulcan were among the most traded ASX shares last week
• 2 ASX growth shares to buy in February
• Leading brokers name 3 ASX shares to sell today
• These ASX 200 shares are on fire in 2021

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia has no position in any of the stocks mentioned. 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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There are some ASX dividend shares that have income yields of more than 4%.

The Reserve Bank of Australia (RBA) has lowered the official interest rate to just 0.25%, which is making it difficult for investors who are looking for income.

Here are three businesses that have dividend yields of more than 4%:

Brickworks Limited (ASX: BKW)

Brickworks is an ASX dividend share with one of the longest dividend records on the ASX – it hasn’t cut its dividend for over four decades.

Whilst the company is best known for being a building products business, its dividend is actually supported by two asset groups.

One asset group is its 50% stake of the industrial property trust with partner Goodman Group (ASX: GMG). Industrial property is in higher demand these days with an elevated level of online shopping from consumers and logistics needs from businesses. This trust provides growing rental profit distributions to Brickworks and Goodman.

There are currently two high-tech warehouses being built by the trust for Amazon and Coles Group Ltd (ASX: COL) at the Oakdale site in Sydney. These new buildings will send the gross asset value of the trust to more than $3 billion once they’re completed. It will increase the rental profit distributions to Brickworks by more than 25%. That could help fund the ASX dividend share’s payout in the coming years.

Brickworks also owns around 40% of investment conglomerate Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) which has a diversified portfolio. Soul Patts has been steadily growing its dividend and capital value for Brickworks over time. 

At the current Brickworks share price it has a trailing grossed-up dividend yield of 4.5%.

JB Hi-Fi Limited (ASX: JBH)

JB Hi-Fi Australia is one of the largest retailers on the ASX. It operates JB Hi-Fi Australia, JB Hi-Fi New Zealand and The Good Guys.

At the current JB Hi-Fi share price, it has a trailing grossed-up dividend yield of 5.2%. This dividend came about after a 76.5% increase to the final FY20 dividend to 90 cents per share, bringing the total FY20 dividend to 189 cents per share, an increase of 33.1% compared to FY20.

The ASX dividend share has delivered more growth in the first half of FY21 with sales growth of 23.7% to $4.94 billion, a 75.9% increase of earnings before interest and tax (EBIT) to $462.7 million and an 86.2% increase of net profit after tax (NPAT) to $317.7 million.

Rural Funds Group (ASX: RFF)

Rural Funds is an agricultural real estate investment trust (REIT). It owns a diverse portfolio of farms across different sectors including almonds, macadamias, cropping (sugar and cotton), vineyards and cattle.

One of the main aims of Rural Funds is to increase its distribution by 4% per annum for investors, which is comfortably more than annual inflation.

There are two main ways that Rural Funds achieves that distribution growth.

Firstly, it has rental growth built into its contracts with high-quality tenants. The rental income at some farms grows by a fixed 2.5% per annum. At other farms the rental income growth is linked to CPI inflation. There are also occasional market reviews at some farms.

The ASX dividend share has a number of high quality tenants like Olam, JBS, Select Harvests Limited (ASX: SHV) and Australian Agricultural Company Ltd (ASX: AAC).

The other way that Rural Funds is growing its rental income is by investing in rental productivity improvements at some of its farms, particularly cattle in recent years. This has the benefit of increasing the farm value and also hopefully increasing the rental potential of that farm.

At the current Rural Funds share price, it has a distribution yield of 4.6% based on the guidance of a FY21 distribution of 11.28 cents per unit.

More reading

• 2 strong blue chip ASX shares rated as buys by brokers
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• 2 ASX 200 shares to buy for dividends
• 3 ASX dividend shares rated as strong buys by brokers
• 2 reliable ASX dividend shares for income investors to buy

Motley Fool contributor Tristan Harrison owns shares of RURALFUNDS STAPLED and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks, RURALFUNDS STAPLED, and Washington H. Soul Pattinson and Company Limited. 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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Last week saw a number of broker notes hitting the wires once again. Three buy ratings that caught my eye are summarised below.

Here’s why brokers think investors ought to buy them next week:

Nitro Software Ltd (ASX: NTO)

According to a note out of Morgan Stanley, its analysts have retained their overweight rating and $3.50 price target on this document productivity software company’s shares. This follows the release of Nitro’s fourth quarter update last week. That update saw Nitro record a 64% increase in annualised recurring revenue (ARR) to US$27.7 million. Morgan Stanley was pleased with Nitro’s stronger than expected ARR and its growing proportion of subscription revenues. The broker believes the company is well-placed to continue its solid growth. The Nitro share price ended the week at $3.13.

Macquarie Group Ltd (ASX: MQG)

Another note out of Morgan Stanley reveals that its analysts have retained their overweight rating and lifted the price target on this investment bank’s shares to $155.00 ahead of its upcoming third quarter update. According to the note, the broker expects Macquarie’s third quarter profit to be roughly flat on the prior corresponding period. Looking further ahead, Morgan Stanley feels the company is positioned to outperform the market consensus estimate for FY 2021. The Macquarie share price last traded at $131.40.

Webjet Limited (ASX: WEB)

Analysts at Credit Suisse have upgraded this online travel agent’s shares to an outperform rating with an improved price target of $5.40. According to the note, the broker believes Webjet is well-positioned to bounce back in 2022 from pent-up demand and market share gains in both the B2C and B2B segments. Credit Suisse is still expecting a sizeable loss from Webjet in FY 2021, before forecasting a return to profitability in FY 2022. The Webjet share price ended the week at $4.78.

More reading

• 3 very impressive ASX quarterly updates from last week
• GameStop frenzy: 3 shorted ASX shares that could shoot up
• The latest ASX stocks to be hit by broker downgrades
• 2 small cap ASX shares growing at a quick rate
• 2 fantastic ASX tech shares to buy in February

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited and Webjet Ltd. The Motley Fool Australia has recommended Nitro Software Limited. 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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Building a nest egg large enough to produce a generous passive income in retirement is likely to be a key goal for many people.

Previously, it may have been possible to simply save money each month to achieve this aim. However, low interest rates over recent years, and especially after the 2020 market crash, mean that a cash savings account is unlikely to be helpful in building a retirement nest egg.

As such, now may be the right time to start buying shares on a regular basis. Even modest amounts invested in a diverse range of stocks could produce a generous income in older age.

Avoiding savings accounts

While having some cash on hand is always a good idea due to the potential for unforeseen circumstances, relying on savings to produce a retirement nest egg could lead to significant disappointment. They offer extremely low returns at the present time, as policymakers across the world have sought to stimulate the economy through a loose monetary policy.

In many cases, savings accounts may even struggle to keep up with inflation over the long run, as policymakers become more concerned about economic growth than a rising price level. As such, beyond having some emergency cash, avoiding savings accounts could be a sound means of improving the potential for a large retirement nest egg.

Making a passive income from shares

In place of savings accounts, a diverse portfolio of stocks could lead to a far more generous passive income. The stock market has a long track record of producing high single-digit returns that could provide growth to modest amounts of money invested on a regular basis.

Now may be an opportune moment to start investing in shares due to their low valuations. Many sectors have not yet fully recovered from the 2020 stock market crash. This could mean that they offer wide margins of safety that translate into high capital returns in the coming years. They may be able to catalyse a portfolio so that it produces a higher growth rate, and a larger nest egg, than investing in an index tracker fund that mirrors the performance of, for example, the FTSE 100 Index (FTSE: UKX) or S&P 500 Index (SP: .INX).

Building a $25,000 income

Even if an investor matches the performance of the wider stock market, they could invest a modest amount each month to produce a worthwhile passive income in retirement.

For example, assuming the same 8% annual total return managed by the stock market in recent decades, a $500 monthly investment could be worth $750,000 within 30 years. From this, a 3.5% annual withdrawal would produce an income of over $25,000. This could provide greater financial freedom and flexibility in retirement versus relying on cash. It could even allow an investor to retire earlier than would otherwise have been the case.

More reading

• 2 quality SaaS ASX shares to buy in February 2021
• Top brokers name 3 ASX shares to sell next week
• 2 explosive ASX tech shares to buy in February
• 2 ASX shares that this fundie really likes right now
• 2 strong blue chip ASX shares rated as buys by brokers

Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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There are quite a few quality software as a service (SaaS) ASX shares that could be worth looking at in February 2021.

Businesses that make their money through a SaaS model usually have attractive levels of recurring business and the software nature of the company means it can have high operating profit margins.

Here are two examples:

ELMO Software Ltd (ASX: ELO)

ELMO describes itself as a cloud-based human resources (HR) and payroll software provider. The company offers customers a unified platform to streamline processes for HR and also manage payroll and rostering, time and attendance. It operates on a SaaS business model based on recurring subscription revenue.

The SaaS ASX share recently released its FY21 second quarter update to the market. It said that it achieved record cash receipts over a 12-month period of $64.5 million, which was up 23% compared to the prior comparative period.

For the quarter ending 31 December 2020, it received cash receipts of $18.8 million, which was an increase of 22.1% compared to the prior corresponding period.

The company has been busy with acquisitions over the last few months. In October 2020 it acquired Breathe, which expanded ELMO’s market opportunity with entry into the small business market in Australia, New Zealand and the UK. In December 2020 it acquired Webexpenses, which gave the SaaS ASX share entry into the expense management sector. Management also said this accelerated ELMO’s mid-market expansion into the UK market.

Annual recurring revenue (ARR) increased by 42.8% year on year to $74.2 million at 31 December 2020. This was driven by new customer growth, the cross-sell to the SaaS ASX share’s existing customer base and boosted by the acquisitions of Breathe and Webexpenses.

For FY21, ELMO is guiding that ARR will finish in a range of between $81.5 billion and $88.5 million. FY21 revenue is expected to be between $65 million and $71 million. Earnings before interest, tax, depreciation and amortisation (EBITDA) is expected to finish as a loss somewhere in the range of negative $2.4 million to negative $7.4 million.

Altium Limited (ASX: ALU)

Altium is one of the world’s leading electronic PCB software businesses. It says that its software focuses on electronics design systems for 3D PCB design and embedded system development. It boasts that its products are found everywhere from world leading electronic design teams to the grassroots electronic design community.

A key focus of the SaaS ASX share is Altium 365, its new cloud platform.

The company is pivoting the business towards Altium 365 after separating its cloud operations from its software business and will focus on growing the market opportunity and expansion into the broader electronics ecosystem.

Altium’s management is referring to this change as Altium’s Netflix moment which is commonly referred to in the high-tech industry as a hard pivot to the cloud. Netflix started off as a DVD business.

Each Altium division will have its own leadership and organisational roadmap, which will allow the cloud business to develop at a different cadence and to form a SaaS-like organisational structure around its product and go-to-market processes.

One benefit from this change is that it will be able to separate high-volume sales from high-touch sales to support the SaaS ASX share’s journey to 100,000 subscribers by 2025 and dominate the PCB design industry.

Sergey Kostinsky has been appointed to the role of President and he will be responsible for driving high performance in the execution of all operational domains with a particular emphasis on the rapid development and adoption of Altium 365.

More reading

• 5 of the best ASX shares to buy in February
• 2 ASX growth shares to buy
• Brokers name 3 ASX shares to buy right now
• Here’s why the ELMO (ASX:ELO) share price is sinking lower today
• 2 exciting mid cap ASX shares to buy and hold

Tristan Harrison owns shares of Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Altium and Elmo Software. The Motley Fool Australia owns shares of and has recommended Elmo Software. The Motley Fool Australia owns shares of Altium. 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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Once again, a large number of broker notes hit the wires last week. Some of these notes were positive and some were bearish.

Three sell ratings that caught my eye are summarised below. Here’s why top brokers think investors ought to sell these shares next week:

Bubs Australia Ltd (ASX: BUB)

According to a note out of Citi, its analysts have retained their sell rating and cut the price target on this infant formula company’s shares to 51 cents. The broker made the move after Bubs’ second quarter update fell short of its expectations. Not only did the company’s sales miss expectations, but Bubs burned through more cash than it expected. Citi isn’t confident the third quarter will be any better, especially given the continued disruption in the daigou channel. The Bubs share price ended the week at 64 cents.

Galaxy Resources Limited (ASX: GXY)

Analysts at Morgan Stanley have retained their underweight rating and $1.35 price target on this lithium miner’s shares. The broker was disappointed with Galaxy’s quarterly update and notes that recoveries were lower than expected and costs came in higher than it forecast. In addition to this, Galaxy’s production and recoveries guidance for FY 2021 fell a touch short of its estimates. The Galaxy share price last traded at $2.69.

Reece Ltd (ASX: REH)

A note out of Morgans reveals that its analysts have downgraded this plumbing parts company’s shares to a reduce rating with a price target of $11.45. According to the note, the broker made the move after reducing its earnings estimates to reflect a stronger Australian dollar. In addition to this, the broker thought that its valuation was getting stretched after a strong gain over the last few months. The Reece share price was trading at $16.01 at Friday’s close.

More reading

• 2 beaten-up infant formula ASX shares to buy
• 3 ASX growth shares to buy in February 2021
• Why Bubs, Kogan, Lake Resources, & Western Areas shares are sinking lower
• 3 reasons why the Bubs (ASX:BUB) share price could be a buy
• ASX 200 drops 2%, IOOF and Afterpay shares sink, Bubs jumps

Motley Fool contributor James Mickleboro owns shares of Galaxy Resources Limited. The Motley Fool Australia owns shares of and has recommended BUBS AUST FPO. 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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A new month is here, so what better time to look to see if there are any additions you could make to your portfolio to take it to the next level.

If you’re interested in the tech sector, then you might want to take a look at the shares listed below.

Damstra Holdings Ltd (ASX: DTC)

The first ASX tech share to look at is Damstra. It is a $250 million integrated workplace management solutions provider. It provides a cloud-based workplace management platform which is used by businesses globally to track, manage, and protect their workers and assets.

Damstra has been growing strongly over the last couple of years thanks to increasing demand for its solutions. This strong form has continued in FY 2021, with Damstra reporting record quarterly growth last week.

For the three months ending 31 December, Damstra delivered unaudited revenue of $6.9 million, which was up 33% on the previous quarter.

This update appears to have gone down well with analysts at Morgan Stanley. Last week the broker retained its overweight rating and $2.00 price target on Damstra’s shares. 

Nearmap Ltd (ASX: NEA)

Another ASX tech share to look at is Nearmap. It is an aerial imagery technology and location data company.

Nearmap has been growing at a strong rate over the last few years thanks to increasing demand for its services in the ANZ and North American markets. And although COVID-19 and foreign exchange headwinds appear to be stifling its growth in FY 2021, management remains very positive on the future.

It is targeting annualised contract value (ACV) growth of 20% to 40% per annum over the long term, with underlying churn of less than 10%. This is expected to be achieved thanks to geographic expansions, new growth initiatives, and the quality of its technology.

One broker that has become bullish on the company is Goldman Sachs. It has just upgraded Nearmap’s shares to a buy rating with a $2.75 price target.

It commented: “NEA appears fairly valued relative to its A/NZ peer group but is attractively priced relative to US software peers with similar revenue growth + EBITDA margin outlooks.”

More reading

• Why the Damstra (ASX:DTC) share price is racing higher today
• ASX 200 up 0.35%: Afterpay & Appen push higher, big four banks rising
• 2 outstanding ASX tech shares to buy today
• 2 ASX growth shares to buy for big returns
• 4 growing small cap ASX shares to watch

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Damstra Holdings Ltd. The Motley Fool Australia owns shares of and has recommended Damstra Holdings Ltd and Nearmap 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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