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Can these ASX IT shares carry their momentum into 2021?

The Megaport, Codan and EML share prices have performed strongly in December but can these ASX IT shares continue their momentum in 2021?
The post Can these ASX IT shares carry their momentum into 2021? appeared first on The Motley Fool Australia. –

asx share price growth represented by fingers walking along growing piles of coins

If you’re an investor looking for momentum going into the new year, you may be eyeing off shares in the S&P/ASX All Technology Index (ASX: XTX).

The sector has gained positive momentum as we count down the final days of 2020, with the All Tech Index rising by 8% in December. 

Information technology (IT) shares have, in general, been the major winners in the pandemic – as people and businesses increasingly moved online due to coronavirus restrictions.

The sector includes some of the market’s biggest names, including Afterpay Ltd (ASX: APT), which has increased by 15% this month alone.

Given an effective vaccine and full reopening could be around the corner however, can this sector keep up its momentum in 2021?

We take a look at three ASX IT shares that have gained in December, and consider their prospects for 2021.

Megaport Ltd (ASX: MP1)

The Megaport share price has risen by over 15% in December.

In fact, the company has been an ASX success story in 2020, with its share price gaining by over 43% year to date (at the time of writing).

Megaport gives corporate clients the flexibility to manage their bandwidth usage. Customers can scale up their bandwidth when demands are high, and then reduce consumption during off-peak periods.

The platform also leverages cloud-based technology to expand company networks beyond the reaches of traditional infrastructure.

As people and businesses increasingly worked, shopped and communicated online this year, these services have been high in demand. As a result, Megaport’s revenues jumped 66% year on year to $58 million in FY20.

This momentum has, so far, been carried into FY21. Megaport reported a record first-quarter increase in customer numbers, with most of the growth coming from the United States.

Arguably, the performance of the Megaport share price in 2021 will largely depend on whether the move to online is ramped up or scaled down as the economy heads ‘back to normal’.

EML Payments Ltd (ASX: EML)

This fintech company is cruising nicely in December, with the EML share price rising by 12%.

The company has been riding on its solid first-quarter FY21 results, with revenue rising from FY20 by 75% to $40.6 million. Its earnings before interest, tax, depreciation and amortisation (EBITDA) also leapt 215% year on year.

EML provides payment technology solutions for payouts, gifts, incentives and rewards, and supplier payments.

The majority of the company’s profits can be attributed to its shopping mall gift card segment, where its gift cards are sold throughout 1,200 malls across Europe and North America.

The EML share price performance in 2021 will, therefore, likely be dependent on whether Europe and the US are able to successfully navigate their way out of the pandemic early next year.

Codan Limited (ASX: CDA)

The Codan share price has picked up good momentum during the month of December, rising by 10%.

It’s been gaining pace particularly after the company announced it’s expecting to deliver another record first half profit for the six months ending 31 December.

The company said it expects net profit after tax (NPAT) to be $40 million for the half, which is up by 33% from $30 million a year earlier.

Codan provides a range of electronic products and software such as radio communications and metal detections to governments and businesses. 

The company advised that demand has been strong for its metal detectors in FY20, in both recreational and mining markets. 

Although its communications business is significantly down this year, Codan expects it to pick up significantly in 2021 – noting the company has an order book of more than $30 million for that segment due in the second half of FY21.

The Codan share price has been a solid performer over the past five years, reflecting gains of more than 1,300%.

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Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends EML Payments and MEGAPORT FPO. The Motley Fool Australia has recommended EML Payments and MEGAPORT FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Can these ASX IT shares carry their momentum into 2021? appeared first on The Motley Fool Australia.

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