Brokers are still finding stocks to upgrade on the ASX even as the S&P/ASX 200 Index (Index:^AXJO) reattempts to break above 6,000.

That level is a psychologically important mark for the ASX, and if successful, will be a bullish development for our market.

The ASX 200 jumped 1% in morning trade to 5,998 points as investors brushed aside their COVID-19 fears and focused on the big jump in retail sales for May.

Shopping for a good buy

This positive sentiment partially explains the 6.3% jump in the Premier Investments Limited (ASX: PMV) share price to $17.35 at the time of writing.

The other reason why the stationery and clothing retailer is outperforming is because Macquarie Group Ltd (ASX: MQG) upgraded the stock.

The broker changed its recommendation on Premier to “outperform” from “neutral” with a $20.11 price target.

The bullish turn comes on the back of the surge in online sales across the sector due to the coronavirus lockdown.

“Online trends within PMV’s portfolio highlight strength within the key brands despite the recent setback of physical store shutdowns,” said Macquarie.

The group’s cost base is also likely to fall, which will pad margins. Premier is pushing shopping mall landlords to cut rents and is eligible for wage subsidies in Australia and some of the other countries it operates in.

However, as Macquarie highlights, quantifying wage subsidies, like JobKeeper, is difficult. There is also a risk that Premier’s aggressive move to force rental cuts can backfire.

Seeking a bargain

Another stock that’s outperforming today is the SEEK Limited (ASX: SEK) share price, which rallied 4.5% to $21.74 at the time of writing.

The jump comes as UBS upgraded the online jobs classifieds group to “buy” from “neutral” today and upped its price target to $23 from $15.25 a share.

There are four driving the broker’s decision. First, UBS thinks the worst for the jobs market is over with its weekly trackers showing sustained improvement in job volumes.

Next, Seek is recommencing its dynamic pricing for recruiters and corporates from next month, which could see yield growth reaccelerate.

Further, the broker thinks the group’s recent temporary cuts to operating costs could be in place for the longer-term.

Finally, UBS economists have revised up their forecast peak in Australian unemployment to 8% from 10%.

There is also an additional factor why investors should buy the stock. Seek’s valuation stands favourably when compared to peers like REA Group Limited (ASX: REA) and Carsales.Com Ltd (ASX: CAR).

More reading

• Brokers name 3 ASX 200 shares to buy today
• ASX 200 up 0.9%: Big four banks rebound, Appen hits record high
• Is the Downer EDI share price in the buy zone?
• ASX tech shares: 2 exciting small caps to watch closely
• Top fund manager reveals some of the best ASX shares to own

Motley Fool contributor Brendon Lau owns shares of Macquarie Group Limited. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited and Premier Investments Limited. The Motley Fool Australia has recommended carsales.com Limited, REA Group Limited, and SEEK Limited. 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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Australia’s top brokers have been busy adjusting their estimates and recommendations again, leading to the release of a large number of broker notes this week.

Three broker buy ratings that have caught my eye are summarised below. Here’s why brokers think these ASX shares are in the buy zone:

Afterpay Ltd (ASX: APT)

According to a note out of Ord Minnett, its analysts have retained their buy rating and lifted their price target materially on this payments company’s shares to $64.70. The broker has been looking through recent data and has made positive revisions. It now believes Afterpay could report almost 10 million active customers by the end of FY 2020. This will be more than double the 4.6 million active customers it had at the end of FY 2019. While it is a high risk option due to its valuation, I agree that Afterpay is a buy.

SEEK Limited (ASX: SEK)

A note out of UBS reveals that its analysts have upgraded this job listings company’s shares to a buy rating with a $23.00 price target. UBS made the move on the belief that the worst is now behind the company and that job volumes have started their recovery. The broker also notes that SEEK’s shares look good value in comparison to other online listings companies. I agree with UBS and feel SEEK would be a great buy and hold investment.

Woodside Petroleum Limited (ASX: WPL)

Analysts at Goldman Sachs have reaffirmed their buy rating and $33.85 price target on this energy producer’s shares. According to the note, the broker believes that Woodside is well-positioned in this low oil price environment due to its low cost operations and its strong balance sheet. Based on its last close price, Goldman’s price target implies potential upside of 55.6% for its shares over the next 12 months. I think this could certainly make it worth considering.

More reading

• Brokers just upgraded these ASX 200 stocks to “buy” today
• ASX tech shares: 2 exciting small caps to watch closely
• Why Adairs, Nick Scali, SEEK, & Splitit shares are storming higher
• 3 quality ASX shares to buy now to get rich later
• Why a2 Milk, Afterpay, and Pushpay shares just hit record highs

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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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At lunch on Friday the S&P/ASX 200 Index (ASX: XJO) is on course to finish the week on a very positive note. The benchmark index is currently up 0.9% to 5,989.5 points.

Here’s what has been happening on the market today:

Big four banks back on form.

The big four banks are back on form and are helping drive the ASX 200 higher. All four banks are pushing higher today, but the Westpac Banking Corp (ASX: WBC) share price is the best performer with a 1.5% gain. Incidentally, earlier this week Citi put a buy rating and $26.00 price target on the bank’s shares. This could be lending some support to the buy side.

Orora goes ex-dividend.

The Orora Ltd (ASX: ORA) share price has failed to follow the market higher and crashed 16% lower today. The majority of this decline is due to the packaging company’s shares trading ex-dividend this morning for its massive special dividend. Eligible shareholders can look forward to receiving the 37.3 cents per share dividend in their bank accounts in 10 days on 29 June 2020. This was the equivalent of a 15% yield based on its last close price.

Appen hits record high.

A number of shares have been hitting record highs this week. One that has achieved this feat on Friday has been the Appen Ltd (ASX: APX) share price. This morning the artificial intelligence company’s shares rose over 3% to $33.49. This latest gain means that Appen’s shares are now up over 50% since the start of the year. Earlier this week analysts at Macquarie initiated coverage on Appen with an outperform rating and $38.00 price target.

Best and worst ASX 200 shares.

The best performer on the ASX 200 on Friday has been the Estia Health Ltd (ASX: EHE) share price with an 8.5% gain. This is despite there being no news out of the aged care operator. The worst performer by some distance today has been the Orora share price with its 16% decline. This was triggered by its shares going ex-dividend this morning.

More reading

• Brokers just upgraded these ASX 200 stocks to “buy” today
• Is the Downer EDI share price in the buy zone?
• Why Air NZ, Evolution, Orora, & Suncorp shares are dropping lower
• Looking to buy ASX technology shares? Here are 4 to consider
• Where to invest for reliable dividend shares

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of Appen 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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Shares in the ‘jack of all trades’ engineering contractor Downer EDI Limited (ASX: DOW) are up by 1.27% in morning trade today to $4.79, following the performance of the S&P/ASX200 Index (ASX: XJO) more broadly.

An often forgotten company that features widespread operations across multiple industries, Downer’s share price remains approximately 50% lower than its peak at $8.94 in January.

Let’s break down why the market has fallen out of favour with this blue-chip powerhouse, and why I see the company as a significant buying opportunity for long-term investors.

What are the current headwinds facing Downer EDI?

As one of the largest companies in Australia with some 53,000 employees, Downer has been a profound victim of the COVID-19 pandemic and its restrictive impacts.

One of the biggest laggards on its operations has been the Spotless Group, an integrated services company in which Downer maintains an 88% stake. Spotless has come to a virtual standstill due to its formidable exposure to catering, hospitality and laundry services.

According to a presentation delivered by Downer at the 2020 Macquarie Australia Conference last month, hospitality revenue for Spotless had been slashed to zero and up to 6,000 employees had been stood down without the JobKeeper stimulus due to the pandemic. This revenue hole was further expanded by the news Spotless was dealing with vastly reduced volumes of laundry from private hospitals due to the decline of elective surgeries.

Apart from the Spotless shortfall, the presentation also revealed that the Downer brand was facing a mine closure in South Africa, and a 70% reduction in productivity spurred by severe lockdowns for New Zealand activities.

Overall, it appears as though the impressive breadth of the company’s operations across several industries has been deeply challenged by the unprecedented COVID-19 pandemic, forcing the share price to bottom out at $2.58 in March. This would have been an agonising period for existing shareholders, who were also hit with the news of Downer deferring its dividend until September this year.

Future outlook – what I like about Downer EDI  

Notwithstanding these challenges, I remain optimistic about the company’s financial performance in FY21 and beyond. Firstly, its balance sheet is bursting at the seams. This has been aided by its financing of a $500 million syndicated bank facility, adding to the already half billion in cash and $1.14 billion of undrawn debt the company held at the end of 2019.

Secondly, coupled with its supreme liquidity, Downer’s longstanding government customer base also ensures it is a likely beneficiary of government stimulus and new infrastructure projects under the JobMaker program. The expertise of the company to deliver high-level transport projects and general urban services likely puts them in good stead to benefit from new government contracts under JobMaker and beyond.

Thirdly, the company’s earnings hit in FY20 will likely be short-lived. Spotless will likely revive its capacity at some point in the coming months, albeit under the caveat of greater social-distancing and hygiene restrictions, and the incidence of elective surgeries already appears to be recovering.

Notably, Downer announced in May that its relationship with Fortescue Metals Group Limited (ASX: FMG) had been extended through a confirmed $450 million agreement at the Eliwana iron ore mine in Western Australia. This 5-year arrangement is the second transaction between the pair, and represents Downer’s broader strategy of utilising existing contracts to expand on subsequent work for its clients.

The Fortescue deal adds to Downer’s impressive current project portfolio, which includes the delivery of the Auckland City Rail Link, railway vehicles including the Sydney Waratah and Melbourne Metro train fleets, and light-rail projects in Parramatta and the Gold Coast.

With plenty of new and existing work on the horizon and a historical dividend yield of 5.8%, I believe the current Downer share price provides prospective investors with significant upside over the medium to long-term.

Foolish takeaway

This company has been equally helped and harmed by its unique exposure to such a wide array of industries throughout the COVID-19 pandemic. Yet, although its ownership of Spotless continues to be a thorn in Downer’s side, I remain optimistic that the company’s exposure to substantial government and private-sector infrastructure projects bodes well for the continued resurgence of the Downer share price.

More reading

• Brokers just upgraded these ASX 200 stocks to “buy” today
• ASX 200 up 0.9%: Big four banks rebound, Appen hits record high
• Looking to buy ASX technology shares? Here are 4 to consider
• Where to invest for reliable dividend shares
• Why I would buy Telstra and these ASX 200 blue chip shares

Motley Fool contributor Toby Thomas has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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The ASX has a fast-growing tech sector. No doubt you’re aware of ASX tech share success stories such as SEEK Limited (ASX: SEK), Afterpay Ltd (ASX: APT), and Xero Limited (ASX: XRO). However, there are number of smaller and less well known small-cap ASX tech shares that are starting to gain momentum.

Two, in particular, that I think are worthy of taking a closer look at are: Bigtincan Holdings Ltd (ASX: BTH) and Audinate Group Ltd (ASX: AD8).

These companies operate under very different business models in their respective tech niches. However, I believe both offer investors strong growth potential over the next five years.

Bigtincan

This small-cap ASX tech share focuses on a fast-growing niche in the IT software market commonly referred to as ‘sales enablement’. The company provides organisations and their sales teams with a platform to access, present, and collaborate on a range of content, thereby improving customer engagement.

Bigtincan is a capital-light and highly efficient operation through its software-as-a-service (SaaS) business model.

The company has an established business presence in the large North American market and an emerging presence in the United Kingdom and European markets.

Bigtincan was able to generate a 178% increase in customer cash receipts to $14.9 million during the third quarter of FY 2020. This places the ASX tech share on track to achieve its revenue guidance target of between 30% to 40% growth for FY 2020.

Key customers continue to expand their usage of Bigtincan’s sales enablement platform. These include organisations such as Nike and AT&T.

On 20 May, Bigtincan announced a $35 million equity raising to assist the company with accelerating its growth. The funds will enable Bigtincan to take advantage of the SaaS sector tailwinds and capitalise on any strong merger and acquisition opportunities that may arise in FY2021 to FY2022.

Audinate

Audinate’s audio networking solutions are used in the production of a range of professional audio equipment. These include everything from microphones and speakers to amplifiers and mixers. These networking solutions improve audio quality by converting audio signals into digital data which can then be more easily distributed via computer networks.

This ASX tech share generates its revenues from sales of equipment manufacture and also from royalties and software licensing fees.

Recent revenue growth has also been strong for Audinate. Unaudited revenue for its most recent quarter rose by 14% on the prior corresponding period to US$5.3 million. Audinate believes it is currently in a reasonably strong position to combat any further challenges arising out of the COVID-19 pandemic, with a strong balance sheet and $30.9 million cash on hand.

More reading

• Why Adairs, Nick Scali, SEEK, & Splitit shares are storming higher
• Looking to buy ASX technology shares? Here are 4 to consider
• 3 quality ASX shares to buy now to get rich later
• Why a2 Milk, Afterpay, and Pushpay shares just hit record highs
• 3 excellent small cap ASX shares to add to your watchlist

Phil Harpur owns shares of AFTERPAY T FPO, SEEK Limited, and Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of AUDINATEGL FPO, BIGTINCAN FPO, and Xero. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended AUDINATEGL FPO, BIGTINCAN FPO, and SEEK Limited. 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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WAM Research Limited (ASX: WAX) has revealed some of the best ASX shares to own for strong returns for your stock portfolio.

What is WAM Research?

WAM Research is a listed investment company (LIC). The job of a LIC is to invest in other shares on behalf of shareholders.

Some LICs invest in large ASX shares, others target smaller ones. Then there’s another group of LICs that look for the best internationally-listed shares to buy for their portfolios.

WAM Research is looking for ASX shares that are the most exciting undervalued growth opportunities in the Australian market.

Why follow what ASX shares this LIC invests in?

It’s true that anyone can name some shares that it thinks are worth buying. Over time a fund manager can create a track record of choosing great ASX shares at the right price. If they’re right, the results will speak for themselves.

Wilson Asset Management is one of the most respected fund managers in Australia with a great track record.

WAM Research changed its investment strategy in July 2010. The LIC’s investment portfolio performance since then, before fees and expenses, has been 14.1% per annum. The S&P/ASX All Ordinaries Accumulation returned 7.6% per annum in that same timeframe. So WAM Research’s gross performance has been better by 6.5% per annum.

I think it’s worth following what this investment team is doing with ASX shares if WAM Research can outperform by that much.

May 2020 update

At the end May 2020, WAM Research’s portfolio had outperformed the index by 5% in FY20 to date. During the May 2020 update WAM Research said that significant contributors to the solid investment portfolio outperformance in the month included auto parts business Bapcor Ltd (ASX: BAP), education placement provider Idp Education Ltd (ASX: IEL) and home furnishings retailer Adairs Ltd (ASX: ADH).

The reason behind owning Bapcor was an anticipation of an increase of car usage as the coronavirus lockdown measures began to reverse. During the month Bapcor raised $56 million from a share purchase plan, adding to the $180 million institutional placement completed in April. This put the balance sheet in a strong position. 

During May 2020 the LIC invested more into ASX share IDP Education. The idea here is that WAM Research expects international students’ tertiary education to recommence faster than expected by the market.

In May’s trading update Adairs said that online sales had beaten expectations and more than made up for the lost revenue from closed stores. Online sales grew 221% in the period. WAM Research also pointed out that the company is managing its working capital and reducing costs across the company. The company’s update today proves it’s still on a good track. 

The WAM Research team stated that they continue to see opportunities in undervalued companies such as Adairs that are able to shift their focus to growing online demand.

What are some of the ASX shares that WAM Research owns now?

At the end of May, its top 20 holdings still included Adairs, Bapcor and IDP Education.

Other ASX shares it owned included gambling machine and gaming business Aristocrat Leisure Limited (ASX: ALL), shipbuilder Austal Limited (ASX: ASB), appliance company Breville Group Ltd (ASX: BRG), natural beauty business BWX Ltd (ASX: BWX), plus-size clothes retailer City Chic Collective Ltd (ASX: CCX), Codan Limited (ASX: CDA), Cleanaway Waste Management Ltd (ASX: CWY), agri business Elders Ltd (ASX: ELD), real estate portal business REA Group Limited (ASX: REA), telco TPG Telecom Ltd (ASX: TPM) and energy business Viva Energy Group Ltd (ASX: VEA).

My own take

I agree that the lifting of COVID-19 restrictions and the shift to online shopping opens up some exciting opportunities for ASX shares like Adairs. City Chic was already selling a good proportion of items online before the pandemic hit. City Chic is one of my top long-term small cap picks. BWX seems to have turned a corner, so that could be one to watch in FY21.

More reading

• Why Adairs, Nick Scali, SEEK, & Splitit shares are storming higher
• Adairs share price soars 16% on trading update and FY20 guidance
• Why I would buy Telstra and these ASX 200 blue chip shares
• ASX 200 falls 0.9%, Afterpay share price hits new record
• What are the best ASX shares for dividends?

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 Austal Limited and Idp Education Pty Ltd. The Motley Fool Australia owns shares of and has recommended Bapcor and BWX Limited. The Motley Fool Australia has recommended Elders Limited and REA Group Limited. 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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In late morning trade on Friday the S&P/ASX 200 Index (ASX: XJO) is on course to end the week on a positive note. At the time of writing the benchmark index is up 1% to 5,996.8 points.

Four shares that have climbed more than most today are listed below. Here’s why they are storming higher:

The Adairs Ltd (ASX: ADH) share price has jumped 15% to $2.40. Investors have been buying the homewares retailer’s shares after the release of a positive trading update. According to the release, second half to date, Adairs’ brick and mortar sales are up 5.3% on a like-for-like basis. The company’s online sales have been growing even quicker. They are up 92.6% so far during the second half. Sales for the recently acquired Mocka brand were up 52.1% over the same period.

The Nick Scali Limited (ASX: NCK) share price has jumped 23% to $7.08. This has also been driven by a positive trading update this morning. The furniture retailer revealed that its fourth quarter sales are up 20.4% compared to the prior corresponding period. In light of this, the company expects to report a 15% to 20% increase in second half profit. This has allowed the board to bring forward the payment of its 25 cents interim dividend to 29 June 2020. In March Nick Scali deferred it until October.

The SEEK Limited (ASX: SEK) share price is up almost 5% to $21.82. Investors have been buying the job listings giant’s shares after analysts at UBS upgraded them to a buy rating with a $23.00 price target. The broker believes that the worst is behind the company now and expects job volumes to start their recovery.

The Splitit Ltd (ASX: SPT) share price has continued its positive run and raced 23.5% higher to $1.70. Investors have been fighting to get hold of the buy now pay later provider’s shares after it announced a partnership with Mastercard. However, it is worth noting that Splitit has warned that it is not able to determine the economic materiality of the partnership. This is due to the contingent nature of results that may be generated.

More reading

• ASX tech shares: 2 exciting small caps to watch closely
• Top fund manager reveals some of the best ASX shares to own
• Adairs share price soars 16% on trading update and FY20 guidance
• 3 quality ASX shares to buy now to get rich later
• ASX 200 falls 0.9%, Afterpay share price hits new record

Motley Fool contributor James Mickleboro owns shares of SEEK Limited. The Motley Fool Australia has recommended SEEK Limited. 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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The S&P/ASX 200 Index (ASX: XJO) is on course to end the week on a positive note. In late morning trade the benchmark index is up a sizeable 0.7% to 5,977.2 points.

Four shares that have failed to follow the market higher today are listed below. Here’s why they are dropping lower:

The Air New Zealand Limited (ASX: AIZ) share price is down a further 2% to $1.42. Investors have been selling the airline operator’s shares since the release of its earnings guidance on Thursday. Air New Zealand advised that revenue and earnings will still be significantly lower than expected in FY 2020 because of the pandemic. It is expecting to report an underlying loss before significant items and tax of up to NZ$120 million.

The Evolution Mining Ltd (ASX: EVN) share price is down 1.5% to $5.22. This morning the gold miner released an update on its Mt Carlton operation. According to the release, recent drilling is indicating a reduction in approximately 75,000 ounces from the life of mine plan. As a result, production at the operation is now expected to be 60,000 ounces in FY 2020 (down from 70,000 to 75,000 ounces) and then 50,000 in FY 2021.

The Orora Ltd (ASX: ORA) share price has crashed 16% lower to $2.30. This decline has driven by the packaging company’s shares trading ex-dividend this morning for its special dividend. Eligible shareholders can now look forward to receiving the 37.3 cents per share dividend in their bank accounts on 29 June 2020.

The Suncorp Group Ltd (ASX: SUN) share price has fallen almost 1.5% to $9.63 despite there being no news out of the insurance and banking giant. This may be down to profit taking after a decent gain over the last 30 days. Prior to today, Suncorp’s shares were up 11% since this time in May.

More reading

• Why Air NZ, Carsales, Pendal, & Star shares are dropping lower
• 5 things to watch on the ASX 200 on Thursday
• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 jumps almost 4%, Webjet share price soars
• 5 things to watch on the ASX 200 on Tuesday

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. 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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ASX technology shares have staged a strong comeback from the March market correction. The S&P/ASX All Technology Index is up 80% from its March low. By comparison, the S&P/ASX 200 (ASX: XJO) is up just 30%. Investors are clearly favouring technology companies as the population increasingly turns to digital means of shopping, working, and communicating. With this in mind, we take a look at 4 ASX technology shares to buy in the next market dip. 

Megaport Ltd (ASX: MP1)

The Megaport share price has risen 92% since its March low, surpassing previous highs. The increase has seen Megaport’s market capitalisation rise to $2 billion, doubling in 13 months. As a result, the technology company has joined the S&P/ASX 200 in the latest quarterly rebalance. 

Founded in 2013, Megaport operates in the network-as-a-service (NaaS) space, providing bandwidth which allows users to connect to cloud services and data centres almost instantly. The company uses software-defined networking (SDN) to enable customers to provision circuits between data centres and their cloud providers. Businesses are able to quickly build and deploy connections to the services they run on. This then creates a network without complex configuration tasks. 

In 1H FY20 Megaport reported a 70% increase in revenue which reached $25.9 million. The business generated a profit after direct network costs of $13.2 million for the half-year. This represented an increase of $8.3 million or 173% on the prior corresponding period. Megaport is now operating in 21 countries following the launch of services in Japan in December 2019.

LiveTiles Ltd (ASX: LVT)

The LiveTiles share price has doubled from its March low of 12 cents. The price received a boost this week after the founders noted the company had been named as the fastest-growing Australian technology company. In a letter to shareholders, the founders outlined the measures LiveTiles has taken to combat the coronavirus pandemic and how it stands to benefit. 

LiveTiles is a provider of intranet software used to create dashboards, employee portals, and corporate intranets. During the pandemic, it has been assisting over 1,000 customers to support remote employee communications, operating system access, collaboration and document sharing. Due to the increase in remote working, there has been an uptick in interest in LiveTiles’ solutions. 

LiveTiles reported annualised recurring revenue of $55.2 million at 31 March 2020, up from $52.7 million at 31 December 2019. Annualised recurring revenue has grown 60% in the last year and is up 4.9x in 2 years. Average annual recurring revenue per customer was over $51,500 at the end of the March quarter, up 32% on the prior corresponding period. 

Nonetheless, the pandemic has forced the technology company to cut costs. Although, it has said it has no requirement to raise further capital to fund operating cash burn. LiveTiles reports that it is well capitalised with more than $33 million cash on hand as of 31 March. It is accelerating efforts to reach breakeven operating cash flow and is taking tangible steps to achieve this during 2020. 

Xero Limited (ASX: XRO)

The Xero share price has increased 50% from March lows, spurred by the release of its full-year results in May. Xero reported that COVID-19 had a relatively modest impact on its operating and financial performance for the year. Operating revenue grew by 30% to NZD$718.2 million, with subscriber numbers growing 26% to $2.285 million. 

Nonetheless, Xero warned that the impact of COVID-19 on March trading resulted in a reduction in annualised monthly recurring revenue progress. This, along with the ongoing impacts of COVID-19, will be reflected in Xero’s FY21 performance. 

Xero provides cloud-based accounting software to predominantly small and medium businesses. It took the tech company more than a decade to reach its first million subscribers, but just 2 and a half years to add the next million, demonstrating the pace of its adoption across key markets.

Xero achieved its first full-year net profit after tax of $3.3 million in FY20. This was a $30.5 million improvement over the $27.1 million loss in FY19. Its results were driven by revenue growth, improved gross margin, and disciplined cost management. There is no doubt the pandemic will take a toll on many of Xero’s customers. While this creates uncertainty, Xero’s ambition to drive cloud accounting globally and grow its small business platform remains unchanged. 

Kogan.com Ltd (ASX: KGN)

Online-only Kogan is one of the few retailers to benefit from the coronavirus pandemic, shares are up 270% since March. In April and May Kogan’s gross sales increased by more than 100% year on year. This drove a 130% increase in gross profit across the period. 

Kogan added 126,00 active customers in May, growing active customer numbers to 2,074,000 at the end of the month. Adjusted EBITDA grew by 219.3% across April and May. Financial year to date adjusted EBITDA up by more than 50%. The company had cash of $58.6 million at the end of May with its debt facility drawn to $26 million. 

Earlier this month Kogan launched a $100 million capital raising at an offer price of $11.45 per share. Funds will be used to increase financial flexibility, giving the ability to act quickly on accretive opportunities, expand the customer base, and enhance the operating model. 

In May Kogan acquired Matt Blatt, a furniture and homewares retailer, for $4.4 million. The business reported $46.5 million in revenue in FY19, with 20-25% generated online. Of course, Kogan is not just an online retailer – it also offers services including insurance, internet, mobile, and energy. 

Kogan has benefitted from a spike in sales due to lockdowns while many bricks and mortar stores were forced to close. This has pushed the ASX technology share well up, with the price to earnings (P/E) ratio over 70. Nonetheless, the company stands to benefit from the long-term shift to digital which has been accelerated by current events. 

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Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of LIVETILES FPO, MEGAPORT FPO, and Xero. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd. The Motley Fool Australia has recommended LIVETILES FPO and MEGAPORT FPO. 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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