Top UK tech stocks to watch
Discover some of the UK tech stocks with the most attractive long-term growth prospects and short-term volatility and find out how they’ve done in the wake of Covid-19.
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We’ve taken a look at some popular UK tech company stocks across different markets within the London Stock Exchange (LSE). These tech stocks are not necessarily the biggest risers or largest by capitalisation, instead they are companies that have seen volatile movements in their share price or have a strong outlook.
Top FTSE 100 tech stocks
Ocado Group is a FTSE 100 company predominantly known for its online grocery operation. However, the firm doesn’t have any stores and utilises robot-operated picking, then ships the goods from its warehouses to customers – making it a grocery chain with a heavy influence from the tech sector.
Ocado also has a digital grocery platform that automates retail warehouses. It licenses this technology out to a number of leading supermarkets from around the world and assists them with their online services, storage and distribution.
This business model meant that the Covid-19 pandemic disrupted Ocado far less, operationally, than many grocery chains. In 2020, the company performed extremely well due to an influx in online orders caused by the pandemic and saw its share price increase by more than 60%.
However, as traditional supermarkets were forced to move their services online, Ocado lost some of its market share. Then, in September 2020, supermarket giant Marks & Spencer bought half of Ocado’s grocery business.
Going forward, Ocado’s share price has seen significant fluctuations as consumers return to normality after the pandemic.
Halma is an acquisition-led FTSE-100 business that buys companies, invests in them and helps them grow. This brings together often niche businesses under one umbrella to provide support and faster growth. It usually keeps existing management of any company it buys in place and gives it what it needs. This includes boosting exports from its key hubs in the US, China, Brazil, India and the EU or providing the tech it needs.
It has at least 44 companies on its books, many of them led by technology. Its portfolio is comprised of businesses providing everything from gas detection and elevator safety systems to environmental monitoring tools and medical devices.
Halma is an attractive stock for several reasons. It is a diversified company in terms of both products and geography, has delivered reliable growth and profitable. Plus, it has increased its dividend by over 5% annually for 40 consecutive years.
Halma’s revenue did fall 5% in the six months to September 2020 due to the effects of Covid-19, and its share price moved just 5.25% throughout the year. Despite this recent performance, analysts believe there is still a positive long-term outlook for Halma. Looking over a five-year period, we can see Halma’s shares have increased by almost 190%, which indicates it is a steady-growth stock.
Top FTSE 250 tech stocks
Games Workshop (GW) is a well-known British manufacturer or wargames and tabletop miniatures. The company is one of the FTSE 250’s best performing retailers of the past five years, with its share price rising over 2000% since 2016.
A large part of this meteoric rise was thanks to its strong sales and dividend scheme, which encouraged investor confidence despite the pandemic. While others in the retail sector saw declining sales, GW issues a profit forecast of approximately £90 million for the fiscal year (ending May 2021), which was up from £59 million in 2020.
Although Games Workshop’s fanbase is small, they are dedicated and have remained so in lockdown, which has caused online sales to skyrocket. However, it remains to be seen if Games Workshop will see a dip in revenue once national lockdowns ease and people start spending more time away from their homes.
Kainos Group provides IT, consulting and software services to businesses, governments and healthcare providers. This can involve everything from data analytics and artificial intelligence to cyber security and cloud computing. It’s also the go-to consultancy for Workday software, with its Kainos Smart software automating testing to help save companies time and money.
Kainos boats several big-ticket customers, including Netflix, Diageo and AB Foods-owned Primark. The company has delivered over 70 digital transformation projects for the UK’s public sector, with clients like the Ministry of Justice and the National Health Service (NHS).
Since most of the company’s employees could easily work from home throughout the pandemic, Kainos saw little impact on its day to day performance. For the first six months of the 2021 financial year (FY21), Kainos reported a 23% growth in revenue and a 41% revenue growth for Workday.
Softcat supplies IT infrastructure software centred around four areas: cyber security, IT intelligence, hybrid infrastructure and digital workspace tools. Through its work, it aims to leverage data to make systems more efficient, balance the need for on-premise data centres and cloud computing infrastructure, and help facilitate remote working.
It has several recognisable strategic partners, including Adobe, Amazon Web Services, Dell, Citrix, Cisco and Sophos Group – demonstrating the importance of its services even for the biggest of clients.
Like Kainos, Softcat has seen a significant uptick in its performance thanks to the technology boom during the pandemic and the enormous demands for cloud solutions to help employers deploy remote working solutions for their staff. As such, its latest results reported a 10% increase in revenue and a 20% increase in gross profits, comfortably above estimates at the time.
Top AIM tech stocks
Blue Prism Group
Blue Prism Group supplies robotic process automation (RPA) software to provide businesses with what it calls a ‘digital worker’. It says it uses a combination of RPA and artificial intelligence so its digital workers can ‘execute and initiate systems-based tasks like a human’, reducing the need for labour and improving efficiency. Blue Prism sells into more than 60 countries and customers tend to start small before buying more services.
It’s part of a group of UK shares that has a market capitalisation of over £1 billion – its currently valued at £1.22 billion.2 In 2020, shares of Blue Prism have increased by 45.8% and its stock price climbed more than 200% throughout the year, although it saw its fair share of volatility caused by Covid-19.
On 14 January, Blue Prism announced its latest interim results, with causes for both concern and optimism within – even though the results saw the company’s share price drop 13% in just a few hours. Nevertheless, Blue Prism announced a strong full-year 2020 performance with an estimated 40% growth in revenues. The board also announced they had started to look at a potential second listing in the US as a result of the strong performance and future expansion plans.
IQE is a UK-based manufacturer of advanced electronic ‘wafer’ products (a type of electronic semiconductor) and other materials to the semiconductor industry. Semiconductors are used in practically every electrical device you can think of, but IQE makes around 80% of its revenue from products that help connect wireless devices from smartphones and tablets to satellite navigation systems and smart meters.
Unsurprisingly, that means the deployment of 5G and the increased connectivity it brings is vital for IQE’s future.
The company experienced a fairly turbulent 2020, with its share price falling by almost 70% at the onset of the global pandemic in March – down to 20p per share. However, things have looked up since then. IQE’s latest results boasted a revenue increase of 27% for the full 2020 year and, even more impressively, an increase in earnings before interest, taxes, depreciation and amortisation (EBITDA) of almost 90%.
It’s worth noting that IQE can at times experience a lot of daily price swings, with volatility akin to penny stocks, which could be of interest to short-term traders.
Read more about how to invest in the best 5G stocks
Other main market top UK tech stocks
Moonpig is an online greeting cards and gifts company, which is viewed by some as a tech stock due to its use of technology platforms, applications and data science systems to connect with its clients.
The pandemic has been especially cordial to Moonpig so far, with the retailer reporting that revenue rose 44% in FY21, thanks to lockdowns causing significant demand for online cards and ways to connect. Following this, the company listed as an IPO (initial public offering) on the LSE on 2 January 2021. This was an unqualified success, with shares surging 25% from £3.50 per share to £4.40 less than an hour after listing, leading the company to a market cap of £1.2 billion by the end of the day.
Moonpig has since proved a divisive UK stock, with many investors very bullish on the company’s prospects as a new IPO and others sceptical of its claims of being a tech stock and of its meteoric rise since then.
London-based Deliveroo is a food delivery business listed on the LSE. Founded in 2013, the company operates in over 200 countries across Europe, Asia and the Middle East. Its core business is delivering restaurant meals to customers’ doors, while its subsidiary Deliveroo Editions prepares food themselves, also for home delivery.
Despite the obvious need for meals on wheels in the pandemic era, the company has not had an easy 2020 and 2021. Just ahead of its much-publicised listing on the LSE, Deliveroo released some of its financial results for FY20, with the notable exception of any mention of revenues. As a still-young company, Deliveroo made a loss of £223.7 million. Despite being almost £100 million less than FY19, this was not received warmly by investors and the company found its shares down 14% after its LSE debut on 31 March.
While some remain enthusiastic about Deliveroo’s long term prospects, the company’s listing met with controversy when more than 200 couriers protested the company for alleged bad treatment of its employees on its first day on the LSE. Since then, high profile names such as environmental, social and governance (ESG) investor Edentree Investment Management and Legal & General Investment Management have publicly disapproved of Deliveroo.
Danish Trustpilot is an online consumer review business which listed on the LSE in March 2021. Completely web-based, the website’s mission is to be the universal go-to forum for leaving reviews and for people checking companies’ customer-centricity.
During 2020, the company did brisk business as the self-isolating masses spent more time online. Accordingly, Trustpilot reported two major milestones in November: that it had racked up over 100 million reviews on its site and that it had surpassed $100 million in annual recurring revenue for FY20.
The year 2021 has also shaped up to be a good one for Trustpilot, who listed on the LSE on 23 March 2021. In its IPO, the reviewing website managed to raise over £470 million, with a float of £1.08 billion market cap.
UK tech stocks: what’s the outlook?
UK tech stocks had something of a renaissance in the lockdowns of 2020, with many companies’ share prices and revenues rocketing as the demand for remote working solutions, home grocery delivery and cybersecurity surged.
It has been a busy time for LSE debuts, with several high profile new listings in 2021 so far, most notably Deliveroo, Moonpig and Trustpilot. With other much-hyped IPOs, such as Wise (previously Transferwise), coming in 2021 too.
Now that vaccine rollouts are well underway, it also remains to be seen whether UK tech stocks will continue to do as well as they did in lockdown-defined 2020 and the beginning of 2021, or whether hype will flatten as life begins to (hopefully) return to normal.
1 Deal three or more times in the previous month to qualify for our best commission rates.
2 As of 10 December 2020.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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