There are some ASX tech shares that could be really good technology businesses just like Xero Limited (ASX: XRO).
Xero just reported its FY21 half year result which showed more strong growth and rising profit margins.
But Xero isn’t the only tech business that’s displaying a lot of admirable qualities. Here are three others doing really well:
Redbubble Ltd (ASX: RBL)
Redbubble is an artist product e-commerce business where thousands of artists sells things like wall art, clothes, phone cases, masks and so on.
The FY21 first quarter showed continuing strong growth. It revealed that marketplace revenue soared 116% to $147.5 million. Gross profit grew even faster, rising by 149% to $64.5 million. It generated $22.1 million of EBIT (EBIT explained) in the first quarter, up from an EBIT loss of $1.5 million last year. Operating cashflow rose by by 166% to $27.1 million, up from $10.2 million in the prior year.
The Redbubble share price is down 12% since the news of the potential COVID-19 vaccine broke. But the business continues to benefit from scale, so I think it’s worth watching.
Pushpay Holdings Ltd (ASX: PPH)
Pushpay is an ASX tech share that facilities electronic donations to organisations like large and medium US churches.
The COVID-19 conditions are causing adoption of digital giving to go through the roof, but I don’t necessarily think that the introduction of a vaccine would see everyone go back to donating in cash. Pushpay’s technology has a number of tools useful for the church to connect with its congregation, particularly with the combined offering called Churchstaq.
Pushpay’s FY21 half year result also showed good economies of scale. The gross margin improved from 65% to 68% and the EBITDAF (the F stands for foreign currency) margin, as a percentage of operating revenue, grew from 17% to 31%.
There could be a lot more growth to come as the company is aiming for US$1 billion of annual revenue.
Kogan.com Ltd (ASX: KGN)
Kogan.com is an online retail business which also benefited from the shift to online shopping. Again, there may be a bit of a return to physical store shopping, but online sales growth was occurring before COVID-19 came along.
One of the main positives of Kogan.com, for me, is that it has a growing number of Kogan subscribers that may decide to take up some of the other services that Kogan offers like Kogan Mobile, insurance, superannuation and so on.
Whilst the second half of FY20 was very impressive, Kogan.com actually continued to report strong monthly growth. In Kogan’s August 2020 update it said that gross sales rise by more than 117% year on year, which helped gross profit go up by more than 165% year on year. Adjusted EBITDA grew by more than 466% year on year.
Summary thoughts
Each of these ASX tech shares have very promising long term outlooks. COVID-19 has certainly accelerated the growth of these businesses and I don’t think that’s going to unwind from a COVID-19 vaccine. If I had to pick one today it’s be Pushpay – I think more donations are going to go digital over time, regardless of the path of the pandemic. There are other scalable ASX growth shares in the tech space I like such as Temple & Webster Group Ltd (ASX: TPW).
