What is making Tech Stocks (including ASX-listed stocks) stay at the center-stage?

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Australian Economy, Macro Economics

The outflow of many technology deals has come at a time when technology stocks have been on an upward trend. The technology-heavy Nasdaq in the US, a few months ago, climbed to a 15-year high above 5,000 points, stirring talks of bubble market territory in the process. Technology is turning into a daily life product and computing is becoming embedded in the world, while we seem to be entering deep into the era of digital technology.

A short while ago, we discussed in a related article that how ASX is turning into a junior Nasdaq with overseas players eyeing the stock exchange for listing many tech companies. Of specific interest is the S&P/ASX 200 Information Technology Index (XIJ) are the following areas – firstly, Software & Services, including companies that mainly develop software in various fields such as the Internet, applications, systems, databases management and/or home entertainment, and companies that offer information technology consulting and services, as well as data dispensation and outsourced services; secondly, Technology Hardware & Equipment, as well as manufacturers and distributors of communications equipment, computers & peripherals, electronic equipment and linked instruments; and thirdly, Semiconductors & Semiconductor Equipment Manufacturers.

Exemplary ASX-listed Information Tech Stocks:

Up 3.3% on June 12, 2018, Technology One Limited (ASX: TNE), is an IT stock that is trading at a current market price of $4.39, however, the stock has a market capitalization of $1.34 billion and has an annual dividend yield of 1.99%. The performance change over the five year period has been healthy at 154%. The group has a decent guidance and is expected to move up the ladder with many drivers in place and net profit after tax growth of 10 to 15%.

Appen Limited (ASX: APX) is also an information technology stock and is currently trading at a market price of $12.04 up from $8.65 in January 2018. The stock has a market capitalization of $1.23 billion and an annual dividend yield of 0.57%. The one year run-up has been stupendous at 207%. The group has been a leading provider of data in terms of Artificial Intelligence.

On the other hand, we have seen Get Swift Limited (ASX: GSW) whose market price changed from over $4 to about $0.4 in about 6 months’ period, with ASX highlighting few disclosure issues. However, investors should remember how once this stock rocked the index with a whopping rise in stock price just before the fall.

Investors at domestic front are also evaluating tech players like Titomic Limited (ASX: TTT), which is a developer of 3D printing technology and looks to be an interesting watch.

Then companies like Nearmap Ltd (ASX: NEA), which is engaged in aerial imaging based on Software as a Service (SaaS) technology, are gaining a lot of momentum. Nearmap is moving high with rising Annualised Contract Value (ACV) and expansion in the US.

Now at global level, technology titan stocks are feeling the pain of a turnaround in a range of stocks in this sector that are charging high to grab some market share. Companies like Dropbox and Spotify Technology SA are taking a lot of spotlight recently and this is causing some restlessness among the tech giants, which still are looking for opportunities to unsettle small players.

For instance, Microsoft is set to buy shares of GitHub for $US7.5 billion, and for this, 28 million programmers are being involved for code generation. It is worth noting that GitHub Marketplace was launched in May 2017 and has been the best place to find, share, and promote developer tools. While Microsoft was not in a favor of getting coders who could be a threat to a company’s commercial software business, Bill Gates and CEO Steve Ballmer supported developers setting proprietary software for Microsoft. Microsoft since then has been relying on open-source software to add tools and GitHub purchase became a key part of the way Microsoft writes its own software. “Anybody active in the open source community should be upset that Microsoft is going to be the steward of this large body of code,” said coder Jacques Mattheij. This deal is now expected to add to Microsoft’s operating income in its fiscal year 2020.

Overall, the tech boom is expected to stay with companies adopting multi-pronged strategies in terms of technology upgrade, bolt-on acquisitions, and geographical expansions; and are coming up with many developments for a better tomorrow given the rising competitive scenario.


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