After a surprisingly strong 2020, some ASX tech shares are struggling to maintain those high rates of growth in 2021.
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2020 was a banner year for global tech companies. While lockdowns, border closures and travel restrictions wreaked havoc across broad sectors of the economy, many tech companies saw demand for their services increase.
In the US, there was the much-publicised success of Zoom Video Communications Inc (NASDAQ: ZM), which grew from relative obscurity to become a globally recognised brand during the pandemic – almost as ubiquitous as Uber Technologies Inc (NYSE: UBER) or Facebook, Inc. (NASDAQ: FB).
In Australia, we had our success stories too. There was the continued – and sometimes baffling – explosion in the price of Afterpay Ltd (ASX: APT) shares, as well as a new generation of previously under-the-radar tech stocks like Megaport Ltd (ASX: MP1), Nitro Software Ltd (ASX: NTO) and Whispir Ltd (ASX: WSP).
However, as economies – particularly the US – begin to emerge from the other end of this pandemic, there has been a cyclical shift away from growth companies and back towards value investing. Anxiety around inflation and the potential for rising interest rates has only compounded this pattern – and sent the share prices of some former market darlings tumbling lower.
Appen Ltd (ASX: APX)
The Appen share price has had a shocking past few months. After surging to an all-time high price of $43.66 last August, Appen shares have shed close to a whopping 70% of their value, and are now trading at just $13.43.
The AI and machine learning company struggled last year. Although it originally flagged that earnings before interest, tax, depreciation and amortisation expenses (EBITDA) for the full year ended 31 December 2020 would be in the range of $125 million to $130 million, the company was forced to make a downgrade later in the year. EBITDA eventually came in at just $108.6 million.
Altium Limited (ASX: ALU)
It might be surprising to see Altium on this list. Along with Appen, it is part of the much-vaunted WAAAX group of ASX tech companies, and had delivered consistently high returns to shareholders prior to COVID-19.
However, it has also struggled since the pandemic started. After delivering 8 straight halves of double digit revenue growth, Altium reported a 4% decline in revenue (versus the prior comparative period) for the half-year ended 31 December 2020.
Altium will be hoping the decline is only a temporary blip. Its share price has dropped almost 20% already this year, and is worryingly close to its 52-week low price of $23.66.
Nuix Ltd (ASX: NXL)
Embattled tech company Nuix has had a tough start to life on the ASX. Since listing in early December, 2020 for around $8, its share price has plunged almost 60% to just $3.37 as at the time of writing.
On paper, it’s a pretty exciting company operating in the niche field of data analytics and digital forensics. However, it disappointed shareholders with its first-half FY21 results, in which it reported a revenue decline of 4% versus the prior comparative period (to $85.3 million).
Nuix soon admitted that it no longer believed it could hit its original target for full year revenue of $193.5 million, and was forced to downgrade its forecast for FY21 to between $180 million and $185 million.
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