Redbubble is one of the ASX shares that may have growth potential.
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There are quite a few ASX growth shares that have experienced a high level of development over the last couple of years.
Not every business has seen revenue growth since the onset of COVID-19. The ASX travel sector has seen a reduction in volume.
However, there are some businesses out there that are expecting to achieve quite a bit of growth in the coming years:
Redbubble Ltd (ASX: RBL)
This is an e-commerce business which sells a variety of items that have unique artist designs on them such as phone cases, clothes, bags, wall art and so on. Redbubble pays a portion of its gross revenue to the artist who made the design.
There has been a boom of e-commerce demand over the last couple of years. On top of that, Redbubble generated millions of dollars of revenue from masks. That’s unlikely to be repeated in FY22, so management hope that FY22 revenue will be similar to underlying FY21 revenue (which excludes masks).
The ASX growth share believes it’s operating in a sector with a huge addressable market (around US$300 billion) – people can put designs on a lot of different products.
To take advantage of that sizeable opportunity, Redbubble is planning to invest heavily to attract new customers and new artists, retain existing customers and artists, become more efficient and become more profitable.
Redbubble is aiming for $1.25 billion of annual marketplace revenue (after paying the artists) in the next few years. Its profit margins are expected to be low during this period of heavy investment.
The broker currently rates the Redbubble share price as a buy, with a price target of $6.50.
Pushpay Holdings Ltd (ASX: PPH)
Pushpay say it’s the leading resource for church growth, engagement, and management that helps facilitate generosity and participation. It also says that technology is a key element to unlocking generosity from a changing generation.
The company has been steadily expanding its available offering to clients with acquisitions, such as Church Community Builder and Resi Media. This has increased its earnings diversification and market share, giving it greater tools relating to church management and video streaming.
The ASX growth share continues to increase in size. Operating revenue went up 40% to US$179.1 million.
Pushpay says that it adopted best-in-class software tools and scalable processes early in its development. Combined with “strong financial discipline”, management believe these investments will allow “significant” operating leverage to be achieved as revenue grows.
Growing profit margins were demonstrated in the FY21 result. The gross profit margin increased from 65% to 68%. The earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) margin improved from 22% to 34% over the year.
But Pushpay has more plans for growth over the coming years. The company has said:
In the long-term, Pushpay is targeting to increase the appeal of our products to new customers and increase the revenue per customer through continued innovation, and merger and acquisitions.
The Catholic initiative is our first step in investing to grow our customer base outside of our existing core customer base and we have set the goal of acquiring more than 25% of the Catholic church management system and donor management system market over the next five years.
Should you invest $1,000 in Redbubble right now?
Before you consider Redbubble, you’ll want to hear this.
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*Returns as of August 16th 2021
Motley Fool contributor 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 and has recommended PUSHPAY FPO NZX. The Motley Fool Australia owns shares of and 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.