Has the sheen come off WAAAX shares? // Motley Fool Australia

This reporting season has seen mixed results for ASX shares. Some were rewarded by the market for performing better than expected, while others were punished for failing to meet expectations or downgrading their outlook.

The much-vaunted WAAAX shares were not immune. Trading on higher multiples, WAAAX shares were vulnerable to backlash at any hint of weakness.

This reporting season has seen mixed results for ASX shares. Some were rewarded by the market for performing better than expected, while others were punished for failing to meet expectations or downgrading their outlook.

The much-vaunted WAAAX shares were not immune. Trading on higher multiples, WAAAX shares were vulnerable to backlash at any hint of weakness.

Let’s take a look at how the WAAAX shares performed this reporting season. 

WiseTech shares fell off a cliff following the release of the company’s half-year results, dropping more than 35% over two days. Despite promising first-half results, management downgraded the full-year outlook due to the coronavirus outbreak. The effective shutdown of China, which plays a critical role in global manufacturing, has slowed supply chains worldwide resulting in a fall in logistics activities. 

For the first half, WiseTech reported revenue of $205.9 million, up 31%, reflecting increased adoption of WiseTech’s CargoWise platform by logistics organisations. Earnings before interest, tax, depreciation and amortisation (EBITDA) grew 29% to $62.5 million as WiseTech continued to grow its global footprint. 

Net profit after tax and amortisation (NPATA) increased 22% over the prior corresponding period (pcp) to $33.5 million, while net profit grew 160% to $59.9 million. Earnings per share (EPS) was up 147% to 18.8 cents and a dividend of 1.7 cents per share was declared, up 13% on 1H19. 

The outbreak of coronavirus has slowed economic trade although a rebound in volumes is expected once the threat passes. The delay, however, means some transactional revenues may move into the next reporting period. 

Taking into account the anticipated impact of coronavirus on exports and trade, WiseTech lowered its full-year guidance for EBITDA to $114 million – $132 million which would represent growth of 5% – 22%. Previously, management had predicted full-year EBITDA growth of 34% – 42%.

Afterpay shares fell 9% in the two days following the release of its half-year results. The company reported a half-year loss greater than analysts’ expectations although this was largely due to significant, one-off items. 

Afterpay reported a 109% increase in underlying sales which reached $4.8 billion from $2.3 billion in 1H19. Active customers were up 134% to 7.3 million and active merchants were up 86% to 43,200. Afterpay reported continued momentum in its global expansion with US underlying sales of $1.4 billion, almost five times 1H19. The addressable online opportunity from Afterpay’s merchants in the US and UK is $30 billion. 

Group income increased 96% on 1H19 to $220.3 million. EBITDA, however, declined 51% to $6.8 billion due to material investments in marketing, people, and technology targeted towards accelerating growth in existing markets and readying for further geographic expansion. A statutory loss after tax of $31.6 million was reported, impacted by one-off and non-cash items including share-based payments. 

Afterpay is aiming to reach 9.5 million active customers by the end of FY20, and wants to exceed its underlying sales target of $20 billion by FY22. 

Appen shares dropped 18% in the days following the release of its full-year results late last month. The drop, however, appeared to be part of the general market correction rather than a reaction to its results. The artificial intelligence firm reported strong earnings and revenue growth for the year and provided guidance for the coming year in line with market expectations. 

Appen reported a 47% increase in revenue which reached $536 million, underpinned by strong organic growth. Underlying EBITDA reached $101 million, up 42%, while underlying NPAT reached $64.7 million, up 32%. A dividend of 5 cents per share was declared, 50% franked, up 25% on the same period last year. 

Appen’s China operations are growing fast, however, are young and have modest targets. As such, the coronavirus outbreak is expected to have a negligible impact on FY20 group revenue and earnings. 

Appen is expected to focus on expanding its customer base over the next few years and will make significant investments in sales and marketing in 2020. This softened margins in the first half of 2020. Full-year underlying EBITDA for the year ending 31 December 2020 is expected to be in the range of $125 million – $130 million. 

The Altium share price hit an all-time high immediately before the release of the company’s half-year results in mid-February. Shares have fallen more than 30% in the period since following the company’s warning that coronavirus could impact its performance. 

Altium reported revenue growth of 19% to US$92.85 million driven by growth in its key Altium Designer product. Altium Designer seats recorded a 19% lift while the company’s subscription base grew 16% to 46,693 subscribers. 

The company delivered strong EBITDA margin growth while investing in key initiatives with an EBITDA margin of 40% (37% excluding AASB 16). EBITDA grew 22% to US$36.8 million. Profit before tax grew 23% to US$31.8 million. Due to Altium’s accelerated profitability, however, it moved to the full effective tax rate of 27% during the half. This resulted in near flat EPS. An interim unfranked dividend of 20 cents per share was declared, up 25%. 

Altium previously provided full-year revenue and margin guidance of US$205 million – $US215 million with an EBITDA margin of 37% – 48%. The company advised that due to uncertainty about the impact of coronavirus in China and the slower start to Octopart in the first half, it was likely to land at the lower end of the guidance range. 

Xero’s financial year runs to 31st March so it announced its half-year results back in November. In the period since, Xero’s shares reached a high of $89 in February before slipping back 15% to just above $75 currently. In its most recent half-year results, Xero reported strong growth in revenue while also achieving profitability following a loss of NZD$28.5 million in 2018. 

Operating revenue increased 32% in 1H20 to NZ$338.7 million, supported by growth in subscriber numbers. Xero reached a significant milestone during the half, recording more than 2 million subscribers following growth of 30% in subscriber numbers. Where it took a decade to reach Xero’s first million subscribers, it took just 2.5 years to reach the next million demonstrating the pace of Xero’s adoption across a number of markets. 

Annualised monthly recurring revenue increased 30% to NZ$764 million during the half, up from NZ$589 in 1H19. EBITDA grew 91% to NZ$65.9 million leading to a net profit of NZ$1.3 million, an increase of NZ$29.9 million over the prior corresponding period’s loss. 

In the current half, Xero is continuing to reinvest cash generated to drive long-term shareholder value. Free cash flow in the full year to 31 March is expected to be a similar proportion of total operating revenue to that in FY19. Free cash flow in the first half was $4.8 million.