ASX tech shares have compelling business models that allows for quick growth and high profit margins. Here are 3 to look into.
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There are some compelling ASX tech shares that could be worth looking into.
Some technology businesses have the potential to grow quickly and support high gross profit margins because software is so easily and cheaply replicated for new clients and users.
Here are some compelling ASX tech shares that could be worth looking into:
Redbubble Ltd (ASX: RBL)
Redbubble operates two leading global artist product marketplaces, Redbubble.com and TeePublic.com The company says that the artists sell uncommon designs on high-quality, everyday products such as apparel, stationery, housewares, bags, wall art and so on.
The company is slowly but steadily adding more product lines onto its site. One recent example is face masks due to the COVID-19 pandemic. This one category has made many millions of dollars of revenue for the company.
There was a large shift to online shopping during the first half of the 2020 calendar year, but the growth that Redbubble is experiencing has continued.
In the first quarter of FY21, Redbubble reported that its normalised revenue (excluding a change in delivery times) grew 98% to $139.3 million, its normalised gross profit increased by 118% to $59.6 million and it generated normalised earnings before interest and tax (EBIT) of $17.2 million.
Over the long-term the company is aiming for $1 billion of marketplace revenue.
At the time of the FY21 first quarter update, Redbubble CEO Martin Hosking said: “The strategic priority for the group now is to ensure we extend the market leadership we have established. We intend to invest in the customer experience to improve loyalty and retention and ensure long-term higher levels of growth. The company has the resources to undertake the anticipated investments and margin structure to ensure it can do so while remaining profitable.”
Altium Limited (ASX: ALU)
Altium is an electronic PCB software business that offers various software for different engineering outfits to design the products, services and vehicles of the future.
Over the long-term Altium is aiming to become the clear market leader in the industry in the same way that Microsoft dominated the office software space. To do that, it’s trying to reach 100,000 Altium Designer subscribers.
The company is currently going through a transition phase. Not only is it suffering from COVID-19 impacts, but it also focusing on a shift to the cloud with its Altium 365 product. This provides the opportunity for direct monetisation. It can generate transaction fees on manufacturing (like an Airbnb model) and it can also offer premium services (like an Amazon Prime model).
According to Commsec, the Altium share price is valued at 44x FY23’s estimated earnings.
Betashares Nasdaq 100 ETF (ASX: NDQ)
This ASX tech share actually gives exposure to many of the world’s biggest technology businesses.
The biggest positions in the portfolio include Apple, Microsoft, Amazon, Tesla, Facebook, Alphabet, Nvidia, PayPal and Netflix.
There are a number of other interesting businesses in the ETF portfolio like Adobe, Broadcom, Qualcomm, Texas Instruments, Advanced Micro Devices, MercadoLibre, Intuitive Surgical, Activision Blizzard and Zoom.
In terms of the management costs, it has an annual fee of 0.48% per annum.
The net return of Betashares Nasdaq 100 ETF over the last year has been 25.8% and it has produced average returns per annum of 21.25% since inception in May 2015.
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Tristan Harrison owns shares of Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Altium. The Motley Fool Australia owns shares of and has recommended BETANASDAQ ETF UNITS. The Motley Fool Australia owns shares of Altium. The Motley Fool Australia has recommended Cochlear Ltd. and ResMed Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.