In this article are 2 leading ASX growth shares to buy that are dropping heavily right now, including e-commerce stock Kogan.com (ASX:KGN).
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There are some leading ASX growth shares that are seeing falling share prices. The broader e-commerce sector is being sold off.
Global share markets are rising in response to positive news about COVID-19 vaccines. BioNTech (with Pfizer), Oxford University (with AstraZeneca) and Moderna have all done trials which show the vaccines have a high level of effectiveness.
However, e-commerce businesses which have seen elevated customer demand during 2020 have seen their share prices fall backwards over the last few weeks.
But the Motley Fool Share Advisor service still rates the following two ASX growth shares as buys:
Kogan.com Ltd (ASX: KGN)
The Kogan.com share price fell by 5.1% yesterday and it has fallen by 35% since 9 November 2020.
It wasn’t long ago that the company held its annual general meeting (AGM) and gave investors a trading update for the financial year to date to October 2020. The ASX growth shares said that its gross profit was up 99.8%, its gross profit had increased by 131% and adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) had jumped 268.8%.
There has been a strong performance from its Kogan marketplace and product divisions. The last couple months of the calendar year are important for the company because they include online sales events as well as Christmas. To take advantage of this, Kogan.com has been investing in marketing to increase its customer numbers and grow awareness of the brand. Management believe this will be a long-term positive for the company.
The CEO and founder of Kogan.com, Ruslan Kogan, said with the FY20 report release: “There is a retail revolution taking place as more and more shoppers learn about the benefits of e-commerce. We’re seeing record numbers of first time customers, who then go on to make repeat purchases at a 40% faster pace than previously. For us this is a very exciting trend that shows that once customers learn about shopping online, they change their ongoing behaviour. Once someone discovers the benefits of online hopping, I struggle to see why they would ever go back to the old way of doing things. After almost 15 years of preparation, the revolution occurring in retail represents a significant opportunity for Kogan.com.”
According to Commsec estimates, the Kogan.com share price is valued at 24x FY23’s estimated earnings.
Temple & Webster Group Ltd (ASX: TPW)
The Temple & Webster share price fell by 9.5% and it has fallen by 22% since 9 November 2020.
The ASX growth share also recently held its AGM. It said that, on top of 74% revenue growth in FY20, it has grown revenue in the financial year to date (to 19 October) by 138%. It also generated $8.6 million of EBITDA in the first quarter of FY21 which was more than the entire FY20 EBITDA of $8.5 million (which represented growth of 467%). Cashflow was positive in FY20, it finished the year with no debt and $38.1 million of cash. It also grew its active customer number by 77% year on year to 480,000.
Revenue growth was also in the triple digits at the start of the second quarter of FY21, with growth of more than 100%. In the trading update it said that its contribution margin continued to be ahead of its 15% target with customer satisfaction of around 70%.
According to Commsec estimates, the Temple & Webster share price is valued at 31x FY23’s estimated earnings.
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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 and Temple & Webster Group Ltd. The Motley Fool Australia has recommended Kogan.com ltd and Temple & Webster Group 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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