Market jitters have sent some of the share prices of a few ASX shares lower in recent weeks.
Sometimes lower prices don’t mean better value if business conditions are deteriorating.
But other times, lower prices can mean an opportunistic time to buy.
The below two ASX tech shares have dropped. Are they opportunities?
Appen Ltd (ASX: APX)
The Appen share price has declined by 51% over the last five months.
The AI and machine learning business hasn’t been impressing the market recently and the FY20 result didn’t inspire any confidence.
In that full year result, Appen said that revenue went up 12% to $599.9 million, underlying EBITDA (EBITDA explained) rose 8% to $108.6 million and underlying net profit after tax (NPAT) grew 1% to $64.4 million.
Before the results were released, the brokers at Macquarie Group Ltd (ASX: MQG) didn’t have much good to say about Appen in a negative note, with growing competition being a key concern.
One of the main difficulties with having the big US tech businesses as customers is that it means the ASX tech share is quite reliant on a small number of clients for earnings. There are both positives and negatives with this strategy.
In FY21 Appen is expecting to grow underlying EBITDA by between 18% to 28%.
I think it’s fairly hard to judge what an appropriate long-term share price for Appen is, considering the changing dynamics of the industry, so it’s not something I’m looking to invest in.
Altium Limited (ASX: ALU)
Altium is another ASX tech share that has been suffering recently. The Altium share price is down 33% since 21 October 2020.
I certainly think that the company’s share price should be lower compared to pre-COVID because business conditions are much tougher, particularly in China. Before COVID-19, Altium had been making good progress with compliance activities there.
But investors should focus on the long-term with Altium – it’s aiming to be the best and biggest electronic PCB software company in the world. That goal still seems on track. Being the market leaders will give Altium a number of advantages, including pricing power.
The strategy with the cloud offering of Altium 365 could actually lead to Altium’s market share rise quicker due to COVID-19 and changes to how engineers operate.
HY21 wasn’t a strong result with continuing revenue falling by 4% to US$80 million. There was a 15% decline in EBITDA to US$27 million.
However, with the Altium share price now comfortably under $30 I believe this could be a smart time to buy Altium shares for the long-term as long as it can keep winning market share in the coming years and maintaining its ability to generate very strong cashflow.