The price you pay can turn a good investment into a bad investment. But with both Afterpay Touch Group Ltd (ASX: APT) and Altium Ltd (ASX: ALU) shares trading lower, could now be the time to jump in?
About Afterpay and Altium
Afterpay Touch is the owner of what is probably the most popular “Buy Now, Pay Later” app. As of 2019, Afterpay had over 3.5 million registered users worldwide, making it one of Australia’s true technology success stories.
In terms of users, Afterpay appears to be well ahead of ASX rivals Sezzle, Splitit Payments Ltd (ASX: SPT) and Zip Co Ltd (ASX: Z1P), each of which is competing for the presence of mind and a greater share of consumers’ wallets.
Altium is an Aussie company that is a world leader in the design of software for printed circuit boards (PCB’s). At their half-year result in February they announced 24% revenue growth and a whopping 58% profit growth. Every electronic device contains a PCB and with the explosion in smart connected devices, Altium could have further opportunity to grow.
Afterpay and Altium are both attractive investments with great long-term prospects and huge total addressable markets (TAM). However, most people already know this and so the positive sentiment towards the two companies is already priced in.
Buying Opportunity?
While it seems that these companies just keep going higher and higher, both have been trading lower over the last month or two. From February to Friday last week, Altium dropped 14.5%. Although Altium is up 3.3% today, it is still more than 10% off previous highs.
Afterpay is even more dramatic, falling from $28.46 at the start of May to $23.92, a drop of nearly 16%. While both of these companies still look expensive by traditional valuation metrics, they are trading at discounts to their peak prices.
High-Risk Investments
More than whether this is a buying opportunity or not, these results should highlight the volatility of the two companies. Both companies have been known to go up or down 5% or more in a day with no news announced.
If you believe these companies are the next tech giants, today’s prices may look attractive compared to recent times, but don’t expect a smooth ride upwards.
Personally, I still think there are growth stocks that present better value, like the ones included in the free report below.
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Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.
