Where to next for Appen, Altium and Afterpay share prices?
Some of Australia’s most recognisable tech stocks have risen to all-time highs after reporting stellar results during last month’s earnings season.
The growth stories of some of Australia's most talked about technology companies remain intact following the latest round of earning results.
In many cases valuations have become stretched across the sector; yet even so, Appen Limited (ASX: APX), Altium Ltd (ASX: ALU) and Afterpay Holdings Limited (ASX: APT) all posted strong earnings results last month, though this didn’t always translate into share price gains or stability.
During the last 30-days for example – Appen’s share price dropped around 6.55%, Afterpay’s share price skyrocketed 33% and Altium's shares rose a more modest 10%.
Below we take a brief look at the key results of these three hyper-growth tech companies.
Appen share price volatility in focus
Appen Limited (ASX: APX) witnessed intense share price volatility before and after its 1H19 earnings announcement, on August 29.
The day prior to this announcement Appen’s shares rose approximately 10%. This fervent enthusiasm lasted just a short while, and though Appen’s shares climbed another 9% on the morning of the earnings announcement, they finished the session a little more than 10% lower.
Regardless of this extreme reaction, Appen posted strong first-half results last week. Here the AI-focused tech company saw its revenue reach $245m and earnings (EBITDA) hit $46.3m.
Profit margins also improved in 1H19.
Secondly, as we previously reported and maybe one of the most promising developments was comments from Appen’s CEO, Mark Brayan that:
‘An increase in use cases and our existing customers are asking for more data to develop new AI products and to improve their existing offerings.’
Such comments seem to be well reflected in Appen’s strong financial performance – even when considering the extreme volatility the company witnessed around its earnings release.
Following the release of these results, Citibank noted that Appen’s impressive growth and conservative guidance both ranked as key positives.
Bell Potter was also impressed with Appen’s half-year results, slapping the company with a buy rating and a price target of A$27.50.
Altium still on track for 2025 $500m revenue target
Altium Ltd’s share price hit all-time highs off the back of FY19 results that saw revenue come in at $171m and earnings (EBITDA) at $62m.
Other key metrics, such as subscriber growth also saw a healthy uptick in the 2019 fiscal year – rising 13% – with the company ending out the year with 43,600 subscribers.
Speaking to the strength of these results, Altium’s CEO, Aram Mirkazemi said:
'What makes this performance most outstanding is that it has been achieved while Altium has been focused intensely on investing to accelerate future growth. We are increasing the efficiency and reach of our transactional sales model and rolling out our new cloud platform.'
Altium’s management team remains convinced that the company can achieve its 2025 revenue target of $500m.
Year-to-date, the Altium Ltd (ASX: ALU) share price has gained 70%.
From an analyst perspective, Bell Potter highlighted Altium's higher than expected dividend and were impressed by the company's strong cash flow.
Although the broker also pointed out that the tech company slightly missed revenue and EBITDA expectations, Bell Potter retained its buy recommendation and lowered its 12-month price target modestly, to A$38.00 per share (from A$40.00 per share).
Afterpay share price now at all-time highs
Since the beginning of the calendar year, Afterpay Holdings Limited (ASX: APT) has seen its share price skyrocket: rising from A$12.00 per share in January and closing out today’s session at A$31.81 per share.
Though competition and regulatory concerns have recently weighed on Afterpay’s prospects (and caused much volatility), as the above price action makes clear, such worries have ultimately done little to impact investors bullishness around the stock.
Such a view seems to have been confirmed when Afterpay released its FY19 results last week. Here the company posted operating and financial statistics that saw it live up to its ‘growth company’ epithet.
For example, transactions processed through the Afterpay Holdings Limited platform soared 140%, revenue reached A$272.5m and active users topped-out at 4.6m.
Do valuations even matter anymore?
Though immaculate growth figures, Afterpay’s valuation looks to have become particularly stretched in comparison to other Australian technology stocks in recent times.
JP Morgan today, when commenting on Australia’s August earnings season, noted that Afterpay (ASX: APT) currently trades at a stratospheric PE multiple of 819.
Such a metric looks lofty even when compared to Australia’s other high-flying tech stocks. Altium trades at 53.3 times earnings and Appen trades at 49.4 times earnings, for comparison and according to JP Morgan.
Momentum, as JP Morgan notes: looks to be the name of the game right now, with investors seemingly disregarding many other factors.
Analysts seem equally unperturbed with such valuations. According to the Wall Street Journal, Afterpay (ASX: APT) has a consensus overweight rating, with five analysts rating the stock a buy and only two rating it a hold.
As we previously reported, the Australian broker – Ord Minnett – appears to be one of the most bullish on Afterpay's share price potential, slapping it with a buy rating and a A$35.10 price target.
YTD, Afterpay's share price has now risen 164%.
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