ABGSC on the technology sector: “The correction we have witnessed in growth stocks heralds new opportunities for the sector”

Q&A with Øystein Elton Lodgaard, ABGSC Equity Research

PLUS: A preview of our upcoming technology seminar

 
Tell us about where the technology sector is at today?
“Over the last year and especially in the last few months we have witnessed a correction for growth stocks in general and technology stocks in particular. For many companies, the stocks have dropped by as much as 50% or more.
“For some this may be for good reasons: whether because of excessive valuations, growth slowing down, or companies failing to hit profitability targets. But this also creates new opportunities: there are many exciting companies with strong market positions, products or technology that are difficult to replicate, high growth and profitable business models that have become much cheaper over the past year.
“We are on the cusp of an interesting new phase for the sector. As such, we thought it would be an excellent time to host a seminar in which we could explore some of key questions about how things will develop.
“We have handpicked five good technology companies that we think offer some exciting investment opportunities: Kahoot!, LINK Mobility, SmartCraft, Sikri and Pexip. All of these companies are in some way leaders in their respective niches. They are all either profitable today or have been so in the past, proving that they have profitable business models. Lastly, all companies have scalable and sticky software-based products.
 
What can we expect from the seminar?
“We are keen to understand what the key market trends and initiatives are that could drive growth for the companies in the near-term.
“Many of the companies in the sector have invested heavily in more salespeople and developers over the past couple of years. But it takes time from when a new salesperson or developer is hired until they begin to contribute meaningfully. This means that as the companies exit this investment phase there could be a significant increase in both margins and growth rates. In our experience, improved margins and higher growth usually translates to positive share price returns.”
 
ABGSC’s “Technology in the new world” seminar will be held in-person on 17 March at our Oslo office. ABGSC clients can access more information about the seminar here.
RSVP: invitations@abgsc.no
 
*Please note, the seminar is open to clients only.