If I were going to buy one ASX growth share with $1,000 then I’d seriously consider Redbubble Ltd (ASX: RBL) shares.
Whilst Pushpay Holdings Ltd (ASX: PPH) is my highest-conviction ide at the moment, there are other high-quality businesses that I think are worth keeping an eye on.
Redbubble is a very promising business
It’s important to remember that just because a business is doing well doesn’t mean it’s going to go on to dominate its industry across the world, as much as shareholders would like it to.
Having said that, I think Redbubble has a very promising future. It’s an online marketplace business which sells artist-produced products such as wall art, phone cases, masks and clothes.
There are strong advantages when it comes to online e-commerce platforms. Scale really helps. Not just with the margins but also with maintaining its market position. With margins, Redbubble has already developed most of its digital infrastructure, so new revenue comes with much higher margins. It’s much cheaper to run a website than a huge physical store network. In terms of maintaining market position, being one of the biggest means that it’s going to keep attracting different potential buyers and sellers because people want to go where the most choice of products and where the most potential buyers are.
Rapidly growing
After a strong FY20, growth has continued in the first quarter of FY20. It generated $147.5 million of marketplace revenue, which was an increase of 116%. It saw a 149% rise in gross profit of $64.5 million. It also made $22.1 million of EBIT (EBIT explained) and $27.1 million of operating cashflow.
If Redbubble can keep increasing its profit margins over the long term and build its brand power then I think Redbubble has a very promising future over the 2020s.
Already making a lot of cash profit
Plenty of ASX tech shares aren’t profitable, or are priced at a very high multiple of its earnings. Redbubble generated $27.1 million of operating cashflow in just one quarter. FY21’s profit isn’t as important as FY24, but I believe that Redbubble can keep going higher because there is a seemingly unstoppable shift to online shopping, which COVID-19 seems to have accelerated.
Whilst I wouldn’t bet the house on Redbubble, I think it’s one of the most promising ASX growth shares around, particularly because it has a global target market (and sells less than 10% of its products in Australia).
