There are plenty of ASX technology shares that have seen their share prices fall because of COVID-19.
Not every share is a better buy just because it’s cheaper. There are some businesses may run into serious difficulties in the next few months.
So which shares should you have on your watchlist? Here are some thoughts on five of the most exciting ASX tech shares:
Xero (ASX: XRO)
The Xero share price has fallen by 18.7% since the February high.
There is certainly fears that many businesses may go under during this period as revenue dries up. No business means no subscription revenue for Xero. However, its internet-based offering is perfect for their environment where people are working from home. Its payroll service will be important to make ensure that employees continue to be paid during this period.
Xero has a long run growth runway but it still looks quite expensive considering the amount of damage being done to the business community in Australia, the UK and elsewhere.
Tyro Payments (ASX: TYR)
The share price has fallen by 42% since the February high.
The company said that it experienced a 23% decline in processing volumes during the first few days of April, so it’s clear that the lockdown is seriously hurting discretionary spending.
However, Tyro Payments was experiencing strong growth before the outbreak reached Australia’s shores – January saw 27% growth and February saw 30% growth.
Australia may get back to somewhat normal life before many other western countries, so Tyro (and the share price) could be cheap – but this is just guessing. It’s hard to predict when life will go back to normal.
Afterpay (ASX: APT)
The Afterpay share price has fallen by just over 50% since the February high. At one point it was down to $8.90. A big fall is worth investigating to see if there’s value.
Afterpay is an interesting one. Clearly its total underlying sales are going to be a lot less in the final quarter of FY20 than hoped, particularly if COVID-19 keeps spreading in the US.
However, the buy now pay later business could be integral for keeping retailers going with online sales. It’s the internet shopping section of retail where Afterpay has the biggest presence.
But it’s not yet making a profit so investors should pay careful attention to the balance sheet.
Altium (ASX: ALU)
The Altium share price has fallen by 28% since the February high.
Today the electronic design software company withdrew its FY20 earnings guidance just like many other shares have. Management said that its operating model is robust and adaptable for these conditions. And its marketing & direct selling are done through the internet and telephone.
At an industry level electronic design is holding up quite well as engineers are using excess time to go back to prototype designing whilst there’s a slowdown in manufacturing and the supply chain. It’s also looking to accelerate the rollout of Altium 365, its new cloud platform.
Pleasingly, Altium’s cash reserves have continued to grow and are expected to remain strong.
Pushpay (ASX: PPH)
The Pushpay share price has fallen by 19% since the February high, though it had fallen a lot further.
Churches are the main customer base for Pushpay and quite a large number of them are shut in the US. But Pushpay is helping here with its electronic donation system and it can also provide video feeds for the church so that people can continue to electronically ‘attend’ their church gatherings.
It’s doing so well during this that Pushpay recently increasing its expectations of operating profit.
Summary
Tech shares are some of the best placed to get through this because of how the product or service is delivered to customers. At the current prices my top three would be Pushpay, Altium and Xero because it’s easier to see how things will unfold for them. But they aren’t the only tech shares worth looking at, here are some more ideas:
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Disclosure: at the time of publishing, Jaz owns shares of Altium, but that could change at any time.
