The two ASX tech shares in this article could be exciting long-term ideas.
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ASX tech shares could be the place to find exciting long-term opportunities.
Technology is often the sector that is able to generate good profit growth because of the low cost of the underlying product. Tech businesses are often able to grow quickly because of how they can provide services digitally for customers or clients.
These two tech stocks could be ones to consider:
Pushpay Holdings Ltd (ASX: PPH)
Pushpay is a key enabler of US churches to receive electronic donations. It is actually responsible of processing billions of dollars. In FY21 it processed US$6.9 billion of donations, which was an increase of 39% on FY20.
The company says that it adopted best-in-class software tools and scalable processes early in its development. Combined with “strong financial discipline”, these investments will allow significant operating leverage to be achieved as revenue grows.
Despite the high level of investment for growth, Pushpay continues to experience increasing levels of operating leverage.
FY21 saw earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) increase by 133% to US$58.9 million, whilst operating cashflow soared 145% to US$57.6 million.
The ASX tech share is looking to expand in the Catholic segment of the faith sector, which is its first initiative to grow its customer base outside of its existing core base. It has set a goal of reaching market share of more than 25% of the Catholic church management system and donor management system market over the next five years.
The Catholic church is closely associated with many education providers and non-profit organisations, which presents further opportunities within the US and other international jurisdictions. It also continues to look for acquisitions opportunities. It recently acquired video streaming business Resi Media.
At the current Pushpay share price, it is valued at 30x FY23’s estimated earnings.
Kogan.com Ltd (ASX: KGN)
Kogan is a fast-growing e-commerce retailer. It offers a number of different products and services for customers.
The Kogan.com website offers an Amazon-like selection of different categories and items like computers, phones, TVs, clothes, footwear, vacuum cleaners, appliances, furniture and so on. It also has additional services such as a membership program, insurance, credit cards, energy and telecommunications.
FY21 was a year of two halves. The first half showed strong growth, rising profit margins and an expanding customer base. However, the second half showed a growth slowdown and inventory issues.
After working through the inventory difficulties, Kogan’s management is still excited about the future. Over the next 12 months, it’s going to roll out new projects to support its members with membership rewards, new and improved delivery solutions and it will further enhance the online shopping experience.
The ASX tech share will also look to grow its Mighty Ape business in New Zealand, which is growing in size and profitability. Kogan acquired Mighty Ape in December 2020, meaning its contribution for FY21 was seven months to 30 June 2021 where it generated $6.9 million of adjusted EBITDA and $3.7 million of adjusted net profit. For the seven months to 30 June 2021, Mighty Ape contributed around 10% to overall gross profit.
Management say the synergies and integration is progressing well with Mighty Ape. The New Zealand business has grown its active customers by 10% since acquisition to 764,000.
According to Commsec, the Kogan share price is valued at 22x FY23’s estimated earnings. That’s after falling 28% over the last month.
Should you invest $1,000 in Pushpay right now?
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*Returns as of August 16th 2021
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. owns shares of and has recommended Kogan.com ltd and PUSHPAY FPO NZX. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd and PUSHPAY FPO NZX. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.