These 2 fast-growing ASX tech shares are being sold off, including the ETF VanEck Vectors Video Gaming and eSports ETF (ASX:ESPO).
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A number of fast-growing ASX tech shares are being sold off with worries about inflation and interest rates.
Lower prices might be able offer investors a better time to buy these opportunities.
Over the long-term, these ASX tech shares may be able to recover strongly:
Kogan.com Ltd (ASX: KGN)
The Kogan share price has fallen by 40% over the last three months. Several e-commerce ASX shares have fallen heavily recently. Online shopping businesses are now cycling against strong sales performance 12 months ago during the depths of COVID-19.
Even so, Kogan is still producing high levels of sales growth. In the three months to 31 March 2021, Kogan reported that gross sales rose by 47% and revenue grew by more than 65%.
But, excess inventory and lower sales growth have combined to cause problems for Kogan.
During the period, Kogan received inventory ordered in response to the high levels of demand seen in the first half of FY21. This led to the company ending up with high levels of inventory. But then demand fluctuated to lower levels than what had been seen during FY21. That meant the company had to store larger amounts of inventory than expected, resulting in high storage costs and demurrage fees. Kogan has increased promotional activity to compensate for this and optimise its inventory position.
Gross profit grew by 54%, which was faster than the gross sales growth, showing continued margin improvement.
But the inventory issues saw the adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) decline by 24%.
What about the future? The ASX tech share said:
The board looks to the future with confidence as the business has grown its active customer base, invested in key strategic initiatives and has a strong level of in-demand inventory heading into the end-of-financial-year and Christmas trading periods while observing price inflation through global supply chains.
VanEck Vectors Video Gaming and eSports ETF (ASX: ESPO)
This exchange-traded fund (ETF) is about giving investors exposure to the world’s leading businesses in the video gaming and e-sports world.
If you know a bit about gaming you’ve probably heard of several of the ETF’s positions, including some of the biggest 10: Nvidia, Tencent, Sea, Advanced Micro Devices, Nintendo, Activision Blizzard, Netease, Electronic Arts, Bilibili and Nexon.
An ETF’s return is simply the combined performance of its underlying holdings. VanEck Vectors Video Gaming and eSports ETF has fallen in price by 10% over the last month and 20% since mid-February.
But the gaming businesses are exposed to strong underlying trends. The video game business is now supposedly bigger than both the movie and music industries, and e-sports is the world’s fastest-growing sport.
Video gaming has achieved an average annual revenue growth rate of 12% since 2015. E-sports is opening up a number of new revenue avenues including media rights, merchandise, ticket sales and advertising.
E-sports revenue has grown by an average of 28% each year since 2015. VanEck says:
With an active, engaged and relatively young demographic, the stage is set for sustainable long-term growth.
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Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia has recommended Kogan.com ltd and VanEck Vectors ETF Trust – VanEck Vectors Video Gaming and eSports ETF. 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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