Highly valued tech stocks have always been the domain of US stock markets, primarily the Nasdaq.
Apple. Google. Microsoft. Amazon. Facebook. Netflix.
Those US giants are clear number ones in their respective industries. And although there is competition — both amongst themselves, and with other companies — it would be very hard for any of them to be knocked off their perch.
For Australian investors, the market capitalisation of these companies is mind boggling.
Apple recently passed the $US1 trillion mark, or almost $1.4 trillion in Aussie dollars.
Netflix has a market capitalisation of $US150 billion, or just over $200 billion in Aussie dollars. Yet, its revenues are just $US14 billion, and the shares trade on a forward price to earnings (P/E) ratio of 125 times earnings.
By any traditional means, Netflix shares are very expensive. In April, Morningstar Equity Analysts said the stock was significantly overvalued.
Since then, Netflix shares have jumped another 10 per cent higher, proving once more that betting against fast growing stocks is a mug’s game.
Nick Griffin of Munro Partners said on Livewire Markets Netflix could be a $US400 billion company, suggesting there could be 150 per cent upside from its current price.
Here on the ASX, we simply haven’t had dominate tech companies like we see in the US, complete with nosebleed valuations.
But all that is changing. The ASX 200 Index is home
The WiseTech Global (ASX:WTC) share price has soared 26 per cent this week after saying it expects accelerating growth in FY19. The company is aiming to become the leading global player in logistics software.
The Altium Limited (ASX:ALU) share price jumped 28 per cent this week after it reported accelerated FY18 growth, and said it will “dominate the (global) competition well before 2025.”
The Afterpay Touch (ASX:APT) share price has gone berserk this week, jumping 18 per cent higher after announcing it was expanding into the UK by acquiring ClearPay. It has ambitions of being the global leader in the nascent “buy now, pay later” space.
While today, these 3 ASX tech stocks are small in terms of revenue, and highly valued on just about any traditional measure, they have long growth runways ahead.
And in global terms, they are still relatively small companies in market capitalisation terms.
WiseTech Global has a market capitalisation of $7 billion. Altium $3.9 billion. Afterpay Touch $4 billion.
On US stock markets, these companies would be called small caps. In Australia, they are large caps — WiseTech Global sports the same market cap as Coca-Cola Amatil (ASX:CCL).
If these 3 ASX tech stocks do come to be world leaders in their fields, over the years, they have the potential to become the size of some of the US larger tech caps. Atlassian, the Australian tech company listed on the Nasdaq, has a market cap of almost $US20 billion, or over $A26 billion.
WiseTech, Altium and Afterpay shares have had spectacular runs. There could be further upside ahead. Just don’t expect future gains to come in a straight line.
Afterpay Touch shares don’t look cheap, but these 3 shares do…
Combining countless hours of research with over 30 years of hands-on stock market investing experience, The Capital Club’s founder Bruce Jackson has just published his definitive list of 3 Cheap and Good ASX Stocks for 2018.
Afterpay Touch was not one of them, but the list does include one tiny gold mining stock, and the company one top fund manager calls the cheapest stock in the ASX 100.
Find out why these 3 Cheap and Good Stocks could be better buys than Afterpay Touch. But you better hurry… these stocks may not stay cheap for long.