2 high-growth ASX tech shares looking cheap right now

Check out this pair of stocks that have plunged from their 52-week highs. Two analysts reckon the businesses still have excellent prospects.
The post 2 high-growth ASX tech shares looking cheap right now appeared first on The Motley Fool Australia. –

High-growth ASX shares have felt the pinch in recent months as inflation and interest rate fears grip the market.

In the past month, the S&P/ASX All Technology Index (ASX: XTX) dropped a shocking 8% before recovering the last few days to be 1.3% down.

The theory is that companies in the fast-growth stage — usually in the technology sector — must burn through cash to increase their market share and revenue. So any rise in the future cost of money (i.e. interest rates) automatically downgrades their prospects.

According to Forager Funds Management senior analyst Alex Shevelev, these high-growth companies could be in one of 2 camps: those that will need to raise more capital to survive, or those that can survive without it.

Fellow senior analyst Gaston Amoros added in the Forager video that their Australian shares fund is pretty selective about these types of tech shares.

“We do own just a handful that we really, really like — and where I think we got very interesting entry points.”

He and Shevelev presented two of those growth stocks that Forager currently favours:

ASX share going for half price, even though business is doing fine

There is no denying that shares for cloud communications provider Whispir Ltd (ASX: WSP) have taken a battering this year.

Closing Friday at $2.45, the stock is down 45.7% from its 52-week high of $4.51.

But Amoros insisted the company is doing everything right.

“They raised capital in April at $3.70 per share to fund the expansion into the US, which is a huge opportunity for them,” he said.

“The company has since then met every single quarterly annualised recurring revenue expectation in the market… Yet the share price has neatly halved since April.”

So the only reason these tech shares have been punished is the sentiment against businesses perceived to be sensitive to interest rate rises.

This phenomenon recently presented a great entry point for Forager.

“It’s a very exciting business — they keep growing 25% to 30% per annum. They have a very low churn rate, 2%,” Amoros said.

“Net revenue retention is 117%, which means the business grows nearly 20% every year just with existing customers.”

A very sticky revenue stream

Shevelev admitted sports technology provider Catapult Group International Ltd (ASX: CAT) has “had its ups and downs in the past”.

“A new management team took over 2 years ago and ran smack bang into COVID, which damaged their ability to sell.”

So far this year, Catapult shares are down 7.6%. They closed Friday at $1.82, which is a far cry from the 52-week high of $2.32.

But the addressable market for sports technology is large and is “growing quickly”, according to Shevelev.

“The level of contracted recurring revenue in this business is close to 80% of the total revenue, and growing quite quickly.”

And like Whispir, Catapult’s recurring business is also “a very sticky revenue stream”.

“The churn is only about 5% per year.”

Shevelev liked the recent capital raising round as it funded an acquisition that improved Catapult’s video tech.

“It also put some capital on the balance sheet for them to spend over the next 2 years, when they will be free cash flow negative,” he said.

“We think that at the end of that period the business comes out stronger. And management has some very strong growth targets… and have already shown some progress.”

The post 2 high-growth ASX tech shares looking cheap right now appeared first on The Motley Fool Australia.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of August 16th 2021

More reading

Catapult (ASX:CAT) share price higher on surging annual contract value

Whispir (ASX:WSP) share price jumps 8% on solid Q1 growth

Motley Fool contributor Tony Yoo owns shares of Whispir Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Catapult Group International Ltd and Whispir Ltd. The Motley Fool Australia owns shares of and has recommended Catapult Group International Ltd. The Motley Fool Australia has recommended Whispir Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!