Temple & Webster and the ESPO ETF may be compelling ASX shares in May 2022.
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There are some compelling ASX shares that are now much cheaper than they were a few months ago. May 2022 may be a good time to look at these possibilities.
Some businesses are exposed to large addressable markets and are seeking to grow revenue strongly.
Revenue growth can help the compounding potential of these businesses over time.
Here are two compelling ASX shares to consider:
Temple & Webster Group Ltd (ASX: TPW)
This is a business that wants to become a very large Australian retailer of homewares, furniture and home improvement products.
The business valuation has fallen significantly in recent months. Since the start of 2022, Temple & Webster shares have dropped over 50%.
In the second half of FY22, it “continues to trade well” according to management. There has been year on year revenue growth of 23% for the period of 1 January to 30 April compared to the same period in 2020. It was up 116% compared to 2020.
Despite all of the global COVID-19 impacts, the company said its diversified supply chain, including both private label and drop shipping, continues to “hold up well” and underpin growth. It said it’s in a “strong” stock position in the fourth quarter of FY22.
The ASX share continues to invest in areas that help build “key strategic moats” around the business (like data, logistics, augmented reality and AI). It’s going to keep investing in organic growth opportunities like the private label offering while leaving room for potential acquisitions.
It just launched ‘The Build’ website, which targets the $16 billion home improvement market. An initial investment of around $10 million will be made across FY22 and FY23. The Build is expected to make a material revenue contribution and be earnings before interest, tax, depreciation and amortisation (EBITDA) positive in FY26.
VanEck Vectors Video Gaming and eSports ETF (ASX: ESPO)
This exchange-traded fund (ETF) helps investors get exposure to the global video gaming and e-sports sector.
For readers that know about gaming businesses, here are some of the largest names in the ASX share’s portfolio: Nvidia, Tencent, Advanced Micro Devices, Activision Blizzard, Nintendo, Netease, Sea, Unity Software, Electronic Arts and Nexon.
VanEck notes that there are more than 2.7 billion active gamers worldwide. Since 2015, video gaming has achieved 12% average annual growth since 2015 and e-sports revenue has increased by an average of 28% per annum.
The competitive video gaming audience is expected to reach 646 million people globally in 2023, driven partly by the rising population of digital natives, according to the Newzoo Global Esports Market Report.
E-sports has created new potential revenue streams for the video gaming businesses including game publisher fees, media rights, merchandise, ticket sales and advertising.
It has an annual management fee of 0.55%.
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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. has positions in and has recommended Activision Blizzard, Advanced Micro Devices, Nvidia, and Temple & Webster Group Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Electronic Arts and NetEase. The Motley Fool Australia has recommended Activision Blizzard, Nvidia, Temple & Webster Group 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 Scott Phillips.