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It was a disappointing five days for the S&P/ASX 200 Index (ASX: XJO) last week. Over the period the benchmark index fell 0.6% to end the period at 6,715.4 points.

While a good number of shares dropped lower, some fell more than most. Here’s why these were the worst performing ASX 200 shares last week:

Polynovo Ltd (ASX: PNV)

The PolyNovo share price was the worst performer on the ASX 200 last week by some distance with a 28% decline. Investors were selling the medical device company’s shares following the release of a trading update. During the first half, PolyNovo delivered a 31% increase in sales. While this is strong growth, it fell well short of expectations due to a weak second quarter. Bell Potter commented: “Polynovo announced a relatively disappointing trading update, with 1H FY21 sales growth of 31% vs the pcp well below our forecasts, consensus and management expectations.”

Resolute Mining Limited (ASX: RSG)

The Resolute share price was the next worst performer with a 15.1% weekly decline. The majority of this came on Friday following the release of a disappointing production update. For the three months ended 31 December, Resolute achieved gold production of 89,888 ounces. This led to its calendar year production coming in at 395,136 ounces, which fell short of its downgraded guidance of 400,000 ounces. In 2021, management expects production to fall to between 350,000 to 375,000 ounces.

Westgold Resources Ltd (ASX: WGX)

The Westgold Resources share price was out of form last week and dropped 9.8%. This appears to have been driven by weakness in the gold price last week after bond yields widened. It wasn’t just Westgold Resources dropping lower. The S&P/ASX All Ordinaries Gold index lost almost 5% of its value during the five days.

Altium Limited (ASX: ALU)

The Altium share price was a poor performer and tumbled 9.7% lower over the week. The electronic design software provider’s shares came under pressure following the release of its guidance for the first half. Altium revealed that it expects to deliver revenue of around US$89.6 million for the half, which will be a drop of 3% on the prior corresponding period. Management advised that COVID-19 lockdowns have been impacting its sales and led to declines in the United States and Europe. However, it is worth noting that Altium is expecting a much stronger second half and has retained its full year guidance.

More reading

• ASX 200 ends flat on Friday
• 2 fantastic ASX shares to buy and hold until 2031
• Why Advance Nanotek, Polynovo, Resolute, & Tyro shares are dropping lower
• ASX 200 up 0.4%: Afterpay hits record high, bank shares rise, Resolute disappoints
• Here’s why the Resolute (ASX:RSG) share price is sinking lower

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 and recommends Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of POLYNOVO 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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Respected fund manager Wilson Asset Management (WAM) has recently identified two ASX shares that it owns in its portfolio.

WAM operates several listed investment companies (LICs). Some focus on larger companies like WAM Leaders Ltd (ASX: WLE) and some go for medium and smaller ones like WAM Research Limited (ASX: WAX).

There’s also one called WAM Capital Limited (ASX: WAM) which targets “the most compelling undervalued growth opportunities in the Australian market.”

The WAM Capital portfolio has delivered an investment return of 16.4% per annum since inception in August 1999, before fees, expenses and taxes. This gross return outperformed the S&P/ASX All Ordinaries Accumulation Index return of 8.3% per annum over the same timeframe.

These are the two ASX shares that WAM Capital outlined in its most recent monthly update:

Ingenia Communities Group (ASX: INA)

WAM explained that Ingenia Communities owns, operates and develops a portfolio of 74 holiday and lifestyle communities throughout Australia. According to the ASX, it has a market capitalisation of $1.56 billion.

In December, the ASX share announced three acquisitions: the Big4 Inverloch Holiday Park in the Gippsland region of Victoria, the Middle Rock Holiday Park and Village in Port Stephens, New South Wales and the Merry Beach Caravan Park on the New South Wales South Coast for a total cost of $73.9 million.

The fund manager is positive on Ingenia’s holiday parks division, which is benefiting from strong levels of domestic tourism and WAM believes that the company will continue to make earnings accretive acquisitions. Given the positive backdrop of increasing property prices across Australia, the fundie expects strong demand for Ingenia’s residential business, which should be reflected in stronger than expected settlements at the half year result in February.

Australian Finance Group Ltd (ASX: AFG)

WAM explained that this ASX share operates the largest aggregation platform of mortgage brokers in Australia, with almost 3,000 brokers offering business finance, insurance and securitised products. According to the ASX, Australian Finance Group has a market capitalisation of $722 million.

With the company leveraged to new loan originations and refinancing for homeowners, the fund manager see a positive outlook for the company going forward, driven by a combination of record low interest rates, government stimulus measures and improving consumer confidence.

The ASX share recently gave an update at its annual general meeting (AGM). The quarter ending 30 September 2020 was a record quarter of lodgement activity in the residential broking division. October volumes continued with that momentum.

Significant government incentives at both a federal and state level have targeted the first home buyer market. As a result, the first home buyer market share activity has increased to 23% in October, up from 15% in the same period last year.

Looking at October trading showed increases in lodgements across the country. Lodgement volumes for October exceeded $6.7 billion. That was the highest the company has ever recorded and represented a 16% increase from October last year. WA saw the largest percentage increase in volume with lodgements increasing 41% from the same period last year. Queensland growth was 30%, South Australian growth was 25%, NSW growth was 7% and Victoria growth was 11%.

More reading

• 4 ASX shares that helped this fund outperform in December
• Why the Ingenia (ASX:INA) share price is moving higher this morning
• These are the 5 best ASX real estate shares of 2020

Motley Fool contributor Tristan Harrison 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 S&P/ASX 200 Index (ASX: XJO) was flat today, ending at 6,715 points.

Here are some of the highlights from inside and outside the ASX 200:

Objective Corporation Limited (ASX: OCL)

The Objective Corporation share price went up 4% in reaction to a profit update for the first half of FY21.

Based on management accounts produced for the six months to 31 December 2020, the company expects to report revenue growth of 40% to $46.5 million in its upcoming report. The annual recurring revenue rose by 30% to $70.1 million. It also said that its research and development investment went up 45% to $11.1 million.

Earnings before interest, tax, depreciation and amortisation (EBITDA) went up 74% to $11.8 million and net profit after tax (NPAT) grew by 70% to $7.2 million.

The company said that its cash balance was $27.7 million at 31 December 2020.

Objective Corporation’s CEO, Tony Walls, commented on potential customer wins: “Engaging on some new customer opportunities proved more difficult than usual in the first half of FY21, but we expect the strong momentum demonstrated in the first half to continue for the full financial year.”

Integrated Research Limited (ASX: IRI)

The Integrated Research share price went up 1% after the company gave an update about its FY21 half-year result.

The company is in the early stages of preparing its interim financial statements for the six months ending 31 December 2020. Based on internal management accounts and subject to audit review, the company anticipates both revenue and profit after tax to be at the lower end of the guidance provided.

That guidance was that revenue for the first half would be in the range of $34 million to $37 million, compared to the prior corresponding period of $53.2 million. The guidance for profit after tax is expected to be in the range of breakeven to $2 million, compared to the prior corresponding period of $11.8 million.

Integrated Research said that it had a cash balance, net of debt, at 31 December 2020 was $1.7 million. Cash receipts from customers for the period exceeded $40 million and there were no material doubtful debt exposure arising during the period.

Tyro Payments Ltd (ASX: TYR)

The Tyro share price fell almost 12% before the company went into a trading halt.

It was the target of a short attack from Viceroy Research that said that the issues Tyro is experiencing with its payment terminals is worse than what is being reported.  

Tyro is currently going through the process of trying to fix the issue by collecting the terminals from merchants, fixing them and giving them back.

The company said that Viceroy’s report contained false assertions contrary to the company’s recent disclosures.

Next week Tyro intends to provide the ASX with an update about the progress of its recovery plan, an update about its transaction values and a position statement in relation to the assertions, which Tyro said is false.

Afterpay Ltd (ASX: APT)

The Afterpay share price went up another 10% today to finish just over $133. It was the top performer in the ASX 200. The strength of the Affirm share price in the US has really helped push the Afterpay share price higher.

Afterpay’s market capitalisation rose above the market capitalisation of Telstra Corporation Ltd (ASX: TLS) as it continued to strength.

The Afterpay share price has gone up 20.8% over the last two days.

More reading

• What’s in store for the ASX tech sector in 2021?
• Why Advance Nanotek, Polynovo, Resolute, & Tyro shares are dropping lower
• Tyro Payments (ASX:TYR) share price crashes 12% on short seller attack
• ASX 200 up 0.4%: Afterpay hits record high, bank shares rise, Resolute disappoints
• Why Afterpay, BHP, Objective, & Pro Medicus shares are charging higher

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 Integrated Research Limited, Objective Limited, and Tyro Payments. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of AFTERPAY T 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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The Somnomed Limited (ASX: SOM) share price closed 2.3% lower today at $2.12.

While the SomnoMed share price has bounced back 67.5% over the past half year, it still remains more than 11% down on this time last year. We take a closer look at what’s been impacting the healthcare equipment company’s share price.

2020 financial year highlights

The Somnomed AGM presentation from November 2020 draws attention to strong growth in the US and new sales leadership heading up Canada. New key appointments were also announced in Sydney.

Somnomed continued to promote the company’s continuous open airway therapy (COAT) technology as a best-in-class treatment for sleep apnea. The company did not offer FY 2021 guidance in its latest report, due to uncertainties created by COVID-19.

Comparing FY19  to FY20, revenue was down 3% and earnings before interest, tax, depreciation and amortisation (EBITDA) took a 5% hit.

Commenting on the company’s previous 12-month performance, CEO Neil Verdal-Austin said, “The past 12-months have been a mixed bag of, on the one side an incredible overall performance to March but on the other side, a dramatic and almost reverse of those fortunes in Q4 due to COVID-19.”

Why did COVID-19 serve such a harsh blow to the Somnomed share price?

Unfortunately, there are a few middle-men between Somnomed and its customer base. A doctor needs to diagnose a condition, a dentist is then required to fit the COAT device.

During times of lockdowns caused by a global pandemic, people simply can’t accommodate these types of services. That means sales go down. 

From a $2.95 close on 20 February 2020 to 91 cents on 06 April 2020, it’s very clear that the coronavirus had a fierce impact on the company’s shares. 

However, in more positive news, as we move into 2021 Morgans has retained a positive recommendation for Somnomed shares and has increased the target price to $2.55, up from $2.02.

More reading

• The Energy Technologies (ASX:EGY) share price has charged 9% higher. Here’s why.
• Why the Cue Energy (ASX:CUE) share price is soaring 9% today
• Why the Northern Star and Saracen Mineral merger is getting closer
• 2 fantastic ASX shares to buy and hold until 2031
• Joe Biden unveils massive US$1.9 trillion coronavirus stimulus package

Motley Fool contributor Gretchen Kennedy 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 Energy Technologies Limited (ASX: EGY) share price charged higher today on news the company has won a sovereign grant.

Shares in the cable manufacturer were up 9.2% at 8.3 cents in closing trade, after hitting a 20.83% high of 14.5 cents this morning.

What Energy Technologies does

Based in New South Wales, Energy Technologies manufactures and sells specialist industrial cables. The company focuses on the Australian market through its 100% ownership in Bambach Wires and Cables Pty Limited and Cogenic.

In addition, Energy Technologies is also actively seeking potential acquisitions for the group through other products, businesses and opportunities. The $25 million market cap company was founded in 1983 and listed 10 years later on the ASX.

What happened today?

The company advised that Bambach has won a $1.34 million government grant.

The sovereign industrial capability priority grant aims to improve Australia’s manufacturing capability. It specifically supports the Continuous Shipbuilding Program, which includes submarine acquisitions, land combat, protecting vehicles and technology upgrades.

The grant will enable the company to boost its existing capability in manufacturing small, medium, and large diameter, low-voltage silicone copper cables. These are essential for use in submarines and shipbuilding. Total cost for the project is estimated $1.74 million, of which the government is contributing $1.34 million.

Furthermore, Energy Technologies will not have to spend on additional infrastructure as the current Bambach facility in Rosedale is large enough to house the new equipment. As such, construction will start immediately.

Management comments

Energy Technologies CEO Alf Chown welcomed the news, stating:

It is an exciting time for Bambach, with a great deal of the commissioning of Rosedale now complete and the move into larger Government contract work through the timely installation of the Silicon manufacturing equipment, the company is looking at a bright future.

We would also like to thank the Federal Government for the professional manner in which they have worked with us and the support they have shown to Australian manufacturing.

More reading

• Why the Cue Energy (ASX:CUE) share price is soaring 9% today
• Why the Northern Star and Saracen Mineral merger is getting closer
• 2 fantastic ASX shares to buy and hold until 2031
• Joe Biden unveils massive US$1.9 trillion coronavirus stimulus package
• What’s in store for the ASX tech sector in 2021?

Motley Fool contributor Daniel Ewing 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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Cue Energy Resources Limited (ASX:CUE) shares have accelerated upwards today. This comes after the company announced it has started oil production from Mahato PSC in Indonesia.

At the time of writing, the oil and gas company’s shares are up 9.21% to close at 8.3 cents.

What did Cue announce?

Cue Energy advised that it has now begun extracting oil from its PB field in the Mahato PSC.

Located in Indonesia, Mahato PSC is a 5,600sq km basin that is close to several producing oil fields. Multiple surveys and exploration results have mapped the area to contain a highly lucrative resource opportunity.

According to Cue’s release, the start of operations follows the settled dispute between the company and its joint venture partners. The disagreement arose from Texcal Mahato EP, which operates the Mahato PSC.

Cue previously stated that Texcal and other joint venture partners attempted to exclude the company from two wells, named PB-1 and PB-2. Cue’s subsidiary, Cue Mahato holds a 12.5% interest in Mahato PSC.

As part of the settlement, Texcal will issue a cash call for roughly US$300,000 from Cue to conduct exportation activities in PB-2.

Furthermore, Cue will pay US$380,000 to the joint venture partners, which it will tap into its existing cash reserves of US$111,000. The remaining amount will be paid from the company’s share of the PSC performance bond.

Both payments are due to be finalised at the end of this month.

What is the status of both wells?

Since the resolved dispute, Cue revealed that the PB-1 well is producing around 600 barrels of oil per day. The oil is refined and exported through existing third-party facilities.

In regards to PB-2, Cue noted that is it working to bring the well into production with 3 further drills planned. Its anticipated that the drilling program will start sometime in the current quarter.

What did the CEO say?

Commenting on the production launch, Cue Energy CEO Matthew Boyall said:

Cue is excited to see oil production from the PB field after exploration success in late 2019. This is a rapid progression from exploration to production. The PB field will be a third revenue stream for Cue and will further strengthen our business.

The differences between the joint venture partners and Cue have now been resolved and we look forward to a fruitful partnership as production from the PB field increases and further exploration is undertaken in the Mahato PSC.

About the Cue Energy share price

The Cue share price was gaining ground through the course of last year before it lost more than 60% in December. This is when it advised the market it was abandoning the Ironbark-1 exploration well.

Its shares hit a low of 6 cents in March and reached a multi-year high of 24 cents prior to the December announcement.

More reading

• Why Beach (ASX:BPT) and Cue Energy (ASX:CUE) shares are sinking lower

Motley Fool contributor Aaron Teboneras 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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If you’re looking to follow in the footsteps of Warren Buffett and make some buy and hold investments, then you might want to take a look at the ASX shares listed below.

Both of these shares appear fairly priced to analysts, have strong business models, and, importantly, have large market opportunities to grow into in the future.

Here’s why they could be long term market beaters:

Altium Limited (ASX: ALU)

Altium is an electronic design software company which has exposure to the growing Internet of Things and artificial intelligence (AI) markets. With these markets underpinning the explosion of electronic devices globally, demand for software subscriptions has been growing strongly. At the end of FY 2020, Altium had a total 51,006 subscriptions and was generating revenue of US$189.1 million.

And while the pandemic has weighed on its first half performance, management appears confident that its growth will resume in the second half. After which, the company is aiming to double its subscriptions to 100,000 and grow its revenue by 164% to US$500 million by FY 2025/26.

If it achieves its goals, management believes it will have market domination and be in a position to compel key industry stakeholders to support its agenda to transform electronic design and its realisation.

Credit Suisse is a fan of the company and this week put an outperform rating and $35.00 price target on its shares.

Pushpay Holdings Ltd (ASX: PPH)

Another company targeting huge growth in the future is Pushpay. It is a donor management and community engagement provider with a focus on the church market. Thanks to the quality of its offering, its strong market position, and the shift to a cashless society, Pushpay has been growing at a rapid rate in recent years.

Pleasingly, this has continued in FY 2021, with the company upgrading its earnings guidance this week for a second time due to a stronger than expected finish to the calendar year. Management is now forecasting FY 2021 operating earnings of between US$56 million and US$60 million, which will be up a massive 123% to 139% year on year. 

Looking further ahead, management is aiming to win a 50% share of the US medium to large church market in the future. It estimates this to be worth US$1 billion in revenue, which is almost 8 times greater than FY 2020’s revenue of US$129.8 million.

Analysts at Goldman Sachs are bullish on its prospects. They have a conviction buy rating and $2.59 price target on its shares.

More reading

• These ASX shares are growing at a rapid rate in FY 2021
• Are these 2 beaten-up ASX shares turnaround ideas?
• What’s next for WAAAX shares in 2021? 
• 3 ASX 200 shares to buy right now
• Here’s what this leading broker thinks about the Altium (ASX:ALU) share price

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 and recommends Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX. The Motley Fool Australia has recommended PUSHPAY FPO NZX. 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 mega merger between gold miners Northern Star Resources Ltd (ASX: NST) and Saracen Mineral Holdings Limited (ASX: SAR) took a step closer today.

This afternoon Saracen provided the market with an update on a shareholder vote at its virtual scheme meeting today.

What was announced?

According to the release, Saracen shareholders have voted overwhelmingly for the deal that will create a top 10 global gold miner and unlock material synergies.

The release advises that 99.95% of Saracen shares and 98.18% of Saracen shareholders that voted at the scheme meeting were cast in favour of the deal.

Saracen’s Managing Director, Raleigh Finlayson, was pleased to see the merger win exceptionally strong support from shareholders.

He commented: “Our shareholders have been virtually unanimous in their support for our merger with Northern Star. I would like to thank them for their huge vote of confidence in our plan to create a world-scale gold miner which will benefit from extensive synergies, economies of scale, outstanding free cash flow and one of the strongest growth profiles in the global gold mining industry.”

“We are looking forward to implementing our strategy, which will see us target annual production of two million ounces a year exclusively in tier-1 locations,” he added.

What’s next?

With the vote a success, Saracen will now seek the Supreme Court of Western Australia’s approval of the scheme at a hearing scheduled for 2 February.

If the Supreme Court of Western Australia approves the scheme, Saracen intends to lodge the orders with the Australian Securities and Investments Commission on 3 February, so that the scheme will become effective on that date.

If this occurs, Saracen shares will be suspended from trading on ASX with effect from the close of trading on 3 February. After which, implementation of the scheme is expected to occur on 12 February, subject to the satisfaction or waiver of the remaining conditions to the scheme.

More reading

• 5 things to watch on the ASX 200 on Friday
• The Saracen (ASX:SAR) share price dips on dividend update
• ASX 200 down 0.4%: Afterpay tumbles, bank shares lower, gold miners crash
• Why Newcrest (ASX:NCM) and Northern Star (ASX:NST) shares could crash lower today
• 5 things to watch on the ASX 200 on Monday

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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US president-elect Joe Biden has just outlined the details of a major new coronavirus stimulus package in a move likely to comfort investors.

The announcement comes just 5 days before the former vice president is set to take the oath of office and be officially sworn in as president.

Mr Biden made the announcement today. In this, he detailed how the package, reportedly dubbed the ‘American Rescue Plan’ and estimated to cost approximately US$1.9 trillion ($2.45 trillion), will be deployed.

According to reporting in the Australian Financial Review (AFR) today, the package will primarily consist of a new fresh round of stimulus cheques of US$1,400 each. These will supplement the US$600 round of cheques that were sent out just after Christmas.

Those came after President Donald Trump signed a bipartisan relief bill. These new cheques will go to most American families earning under an income threshold.

A new stimulus package for the US economy

The package will also include the following provisions:

• An unemployment insurance boost of US$400 each
• A $20 billion boost to the national vaccine program
• A rise in the federal minimum wage to US$15 per hour, up from the current US$7.25 per hour level
• Grants and loans for small businesses, estimated to cost US$440 billion
• Emergency funding for state, local and territorial governments, estimated to cost US$350 billion
• 14 paid weeks of sick and family leave for caregivers
• Tax credits for families – reportedly consisting of “up to” US$4,000 for one child, or US$8,000 for 2 or more children

President-elect Biden’s Democratic Party won an unexpected majority in the US Senate earlier this month. It did so by sweeping the 2 US Senate seats of the conservative Southern state of Georgia. It already held control of the House of Representatives under Speaker Nancy Pelosi.

As such, there is more likelihood of most, if not all, of the provisions of this package becoming law than if the Republican Party had maintained its previously-held majority. It was the Republican Senate that denied consideration of the US$2,000 cheques over Christmas to begin with. That was despite the objections of Democrats, as well as President Trump.

The Senate will be equally divided between the 2 parties once the new senators are sworn in. However, under the US constitution, the vice president breaks all senate ties, meaning that the Democrats will be in effective control until at least 2022. It will be interesting to see how the US markets react to this new round of stimulus spending overnight.

More reading

• What’s in store for the ASX tech sector in 2021?
• 2 super ASX tech shares to buy
• 4 ASX shares that helped this fund outperform in December
• Top fundie Hamish Douglass warns of ASX share market FOMO
• Douugh (ASX:DOU) share price still in limbo. Here’s why.

Motley Fool contributor Sebastian Bowen 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 global tech sector had a bumper year in 2020 with the NASDAQ gaining 40% over the year as technology companies rode a wave of COVID-19 disruption.

Australia’s All Technology Index (ASX: XTX), which launched in February 2020, finished the year up 42.5%. 2021 is also shaping up to be a promising year for technology shares with government stimulus potentially providing tailwinds to the sector.

The Biden administration is expected to splash cash to get the US economy restarted, with sectors such as biotechnology and artificial intelligence prime candidates for investment. Increased investment in digital infrastructure in the US will have impacts globally, as technology becomes increasingly important in driving our lifestyles and consumption patterns. 

The coronavirus pandemic disrupted traditional ways of working, living, and shopping which largely benefitted tech shares. In 2020 we spent more time than ever online, accelerating trends such as working from home and ecommerce which have been gaining momentum in recent years.

The pandemic increased the importance of the technology sector significantly, as people turned online to manage their work and home lives. Adoption of technology accelerated sharply as the result of lockdowns, boosting tech company returns.

Many of the habits formed in 2020 will carry forward into 2021, driving long-term revenue growth for companies in the tech sector. So which areas of the tech sector should we be watching in 2021?

Digital shopping accelerates

Online shopping, which had been steadily gaining in popularity prior to 2020, received a shot in the arm last year as physical stores shuttered in the face of the pandemic.

Online retailers such as Kogan.com Ltd (ASX: KGN) were the beneficiaries. The Kogan share price gained an impressive 155% over 2020 as sales accelerated.

Online furniture and homewares retailer Temple & Webster Group Ltd (ASX: TPW) saw its share price gain 300% as revenue growth climbed through the year.

Brick-and-mortar retailers with a strong online presence such as JB Hi-Fi Limited (ASX: JBH) and Adairs Ltd (ASX: ADH) also shared in the spoils. JB Hi Fi’s online sales grew by nearly 50% in FY20. Online sales accounted for 39% of total Adairs sales in the first 23 weeks of FY21, versus 20% over the same period the previous year. 

Customers introduced to the convenience and comfort of online shopping during the pandemic are expected to continue to buy online even as physical stores reopen. This means COVID-19 will not only provide a one time boost to ecommerce, but a permanent behavioural shift towards online shopping.

Statista estimates global retail ecommerce sales will grow from US$3.53 trillion in 2019 to US$6.54 trillion in 2022. That’s a massive increase and will provide strong tailwinds to ASX shares in the ecommerce game. 

Buy now, pay later goes mainstream 

There is no doubt 2020 was the year that buy now, pay later (BNPL) solutions went mainstream. Australia’s largest BNPL provider, Afterpay Ltd (ASX: APT), saw customer numbers increase exponentially as the share price rocketed to all time highs.

The rise in digital shopping combined with an increased focus on budgeting in the face of the pandemic, helped drive customers to BNPL providers. Afterpay reported more than 11 million customers in Q1 FY21, nearly double the number just a year earlier.

Competitors such as Zip Co Ltd (ASX: Z1P) and Sezzle Inc (ASX: SZL) saw similar increases. Zip’s customer numbers skyrocketed from 1.8 million at the end of 2019 to 5.3 million in November 2020. Sezzle more than tripled customer numbers between the first quarter of FY20 and the first quarter of FY21. 

BNPL shares are still in growth mode, with many raising capital in 2020 to fund expansion. Analysts are expecting BNPL shares to continue their accelerated growth trajectory in 2021, especially in the North American and European markets.

Demographic trends also support continued growth, with millennials shunning credit cards in favour of BNPL solutions. More merchants across industries are seeking to offer BNPL solutions to attract customers, while geographic expansion is also on the cards.

BNPL solutions are disrupting the traditional credit card industry and are expected to continue to gain market share in 2021. 

Remote working solutions come to the fore 

Much of the world’s workforce was sent home to work in 2020, and many found they enjoyed the flexibility it provided. Forbes has reported that an estimated 70% of the workforce will be working remotely at least 5 days a month by 2025.

Tech sector companies such as Livetiles Ltd (ASX: LVT) that facilitate remote working are set to benefit. Livetiles is an intranet and digital workplace software company. It provides tools that allow dashboards, employee portals, and corporate intranets to be created with artificial intelligence and analytics enhancements available.

ELMO Software Ltd (ASX: ELO) is another ASX tech share that facilitates remote working with its cloud-based HR software. ELMO’s platform allows organisations to manage the employee lifecycle through data analysis to provide meaningful insights. With an addressable market valued around $10 billion, ELMO is looking to capture additional market share in 2021.

ASX tech sector in 2021  

The technology sector has entered 2021 in a strong position. Many of the advantageous social shifts that took place in 2020 look set to continue into 2021 providing the sector with tailwinds.

Online shopping, remote working, and BNPL gained many fans last year and are expected to continue to gain popularity in 2021.

As we become ever more reliant on technology, the future looks bright for tech investors.

More reading

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• Why Afterpay, BHP, Objective, & Pro Medicus shares are charging higher
• The Afterpay (ASX:APT) share price just set a new all-time record high
• ASX 200 rises 0.4%
• What’s next for WAAAX shares in 2021? 

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 and recommends Elmo Software. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd, LIVETILES FPO, Temple & Webster Group Ltd, and ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends ADAIRS FPO and Sezzle Inc. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended ADAIRS FPO, Elmo Software, Kogan.com ltd, LIVETILES FPO, Sezzle Inc, and Temple & Webster Group 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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