I think the two ASX tech shares in this article could be buys for the next decade.
They may not look good value today, but if both of the potential investments below are exposed to some strong tailwinds that could help drive revenue and profit a lot higher over the next decade.
Higher profit would drive the valuation of both them higher as well:
Temple & Webster Group Ltd (ASX: TPW)
Temple & Webster is the largest online-only retailer of homewares and furniture in Australia. It actually wants to be the biggest in the country at some point. But Temple & Webster also talks about international growth at some point. Even if that first step is just New Zealand, new markets will mean a bigger total addressable market for the business.
The company is planning to invest in numerous areas of the business to drive its growth over the next few years. Areas like 3D room visualisations, a virtual designer, augmented reality, data, logistics, delivery, customer service and more will all be improved.
During this period of investing, the EBITDA margin (EBITDA explained
) will be low but remain positive.
As long as Temple & Webster keeps growing its revenue and market share, it should be able to benefit from very strong operating leverage because it’s an online business. In-particular, it has a drop-ship model where a lot of products sold are sent directly to customers by suppliers. This also reduces the need to hold inventory.
In FY21, the ASX tech share’s revenue increased 85% to $326.3 million. In FY22, revenue to 27 August 2021 was up 49%.
Betashares Global Cybersecurity ETF (ASX: HACK)
This is an exchange-traded fund (ETF) that has been created to give investors exposure to the theme of cybersecurity. More and more of the world’s transactions, important information, banking and so on is done online. This is a huge target for cybercriminals. So cybersecurity has to be constantly updated and improved as well.
The 39 businesses in this portfolio are both global players and emerging contenders. Readers may have heard of one or two of the companies in the top 10 list including: Zscaler, Accenture, Okta, Crowdstrike, Cisco Systems, Cloudflare, Varonis Systems, Fortinet, Cyberark Software and Splunk.
I think the earnings of this group are defensive. But the earnings are also going up nicely too.
To me, it’s no surprise that this ASX tech share has delivered an average return per year of over 23% since August 2016 when it listed.
As a group, I think this could be one of the solid sectors to be exposed to over the coming years.
