They have been booted out of an exclusive club, so supply will be up. Will that send their stock prices into freefall?
The post Why these 3 ASX tech shares could plunge this week appeared first on The Motley Fool Australia. –
All eyes will be on a trio of technology shares this morning after Friday night brought some bad news for them.
After market close last week Dow Jones revealed the ASX shares that would be added and removed from the S&P/ASX 200 Index (ASX: XJO) later this month.
Among them are 3 prominent former darlings:
Kogan.com Ltd (ASX: KGN)
Nearmap Ltd (ASX: NEA)
Redbubble Ltd (ASX: RBL)
All of these tech players will be removed from the ASX 200 before trading begins on Monday 20 December.
So what if they’re no longer in the ASX 200?
So what’s the big deal? What difference does it make if they’re not in the ASX 200?
Removal can potentially have an impact on share price because passive funds that follow the index will be forced to sell their holdings.
This will increase supply, which could affect the going price.
All 3 companies have had something of a fall from grace in recent times.
Online retailer Kogan has seen its shares lose more than 60% this year. Marketplace platform Redbubble has lost almost 44%, while aerial imagery provider Nearmap has plunged 34%.
Shareholders will have to brace themselves for potential further falls this week in response to the ASX 200 removal announcement, then again on 20 December as passive funds sell them off.
These tech shares have still returned plenty
Despite their recent troubles, all 3 tech shares teach a stark lesson on the benefits of long-term investing.
Each has provided investors with handsome returns over a 5-year interval. Kogan has risen a spectacular 431%, Redbubble has almost quadrupled (293%) and Nearmap has returned 129%.
There are plenty of analysts who consider all 3 to be bargain buys at the moment, with further discounting that could come this week.
Credit Suisse has a price target of $13.88 on Kogan, which closed Friday at $7.71.
Redbubble is rated as buy by Morgan Stanley, which has set a price target of $6.50 as a contrast to the current $3.34.
And according to CMC Markets, 3 of 6 analysts are rating Nearmap stock as a “strong buy”.
The post Why these 3 ASX tech shares could plunge this week appeared first on The Motley Fool Australia.
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Motley Fool contributor Tony Yoo owns shares of Nearmap Ltd. and REDBUBBLE FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Kogan.com ltd and Nearmap Ltd. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd and Nearmap Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.