If I had $5.000 to invest into ASX tech shares, I know which ones that I’d want to buy for my portfolio.
Technology businesses are quite often the place to find companies with exceptional growth potential and strong profit margins.
There are some fabulous businesses like Xero Limited (ASX: XRO) and Pro Medicus Ltd (ASX: PME), but they aren’t exactly cheap.
I’d have my eyes on these ASX tech shares that seem like good opportunities:
Pushpay Holdings Ltd (ASX: PPH)
Pushpay is a digital donation business that is tapping into the trend of payments turning electronic. It’s convenient, allows clients to track giving and provides a number of church management tools. It’s large and medium US churches that are the main client base.
The business has a number of growth avenues it can pursue. It’s expanding its usage with existing clients, making useful bolt-on acquisitions with its strong cashflow, it’s looking to expand into other areas like the Catholic segment of US churches, and eventually perhaps international expansion.
Its profit margins and processing volume continue to expand.
I think it looks good value at 29 times the estimated earnings for the 2023 financial year, using CommSec’s numbers.
Redbubble Ltd (ASX: RBL)
Redbubble is an e-commerce ASX tech share that sells household products with creative designs on them. It pays the artists a commission for each product that has that design.
I think there is a good tailwind for buying cool products through online shopping. Redbubble can tap into both of these trends.
Management believes there’s a huge addressable market here. It’s going to invest heavily over the next couple of years to capture that opportunity. The business is scalable. That should lead to rising margins this decade. There is also the potential for Redbubble to make more bolt-on acquisitions that strengthens or diversifies its offering and/or earnings.
In five years, Redbubble could be a much bigger and more profitable business.
Adore Beauty Group Ltd (ASX: ABY)
Adore Beauty is another ASX tech share that’s tapping into that growth of the e-commerce world. COVID-19 has accelerated that adoption, but I think there is further market share growth to come.
FY21 was a strong year, with revenue rising 48% to $179.3 million. The annual revenue per active customer grew by 7% on the prior corresponding period to $219.
Its profit margins are increasing. The gross profit margin improved by 1.2 percentage points to 33.1%. Whilst revenue grew 48%, EBITDA (EBITDA explained) rose faster – going up 53% to $7.6 million. FY22 revenue was up another 26% in the first few weeks.
It’s got no debt and has $29 million cash to fund growth.
The ASX tech share reckons the beauty market is going to keep growing over the next few years, with online beauty sales rising at an even faster rate.
