If you’re a keen investor in all things technology, you have reason to be a little concerned about the way the sector has started 2022.
Everywhere you look, tech stocks are being hammered.
Some of the world’s biggest names have not been immune: Netflix is down 33% this year, Tesla is down 21% and Amazon is down 16%.
And in Australia, the ASX-listed tech darlings are copping a beating: Xero is down 21%, while both Seek and WiseTech Global have lost 14% of their value in 2022. (Perhaps Afterpay Ltd saw it coming; it was acquired by US payments giant Block and will no longer be listed on the ASX.)
Why is this happening?
Morgan senior analyst Nick Harris says the tech market tumbles are due to wider concerns about interest rates and inflation.
Though Australia’s interest is sitting at historic lows of 0.10%, and the Reserve Bank of Australia has previously issued assurances it won’t raise interest rates until at least 2023, there is widespread speculation we will see small increases this year.
Meanwhile, Australia’s inflation rate is currently sitting at 3.0%. It peaked at 3.8% in the June quarter last year and hasn’t been this high in more than a decade.
“To be quite blunt, the performance in tech stocks this year has been pretty sad, unfortunately,” Harris says.
“It is being driven by fear around interest rates and inflation, and that impacts growth stocks the most.
“Tech companies can experience faster growth and higher cash flow, and their value is in the future.
“It has been a big shock to the system after so many years of low-interest rates, and with COVID we saw huge pools of money being thrown into economies to stimulate growth, and as that happens we start to ratchet up interest rates.”
But don’t lose hope
Despite the concerning falls being seen across the tech sector, Harris says there’s no need to panic about it being a long-term trend.
And his view is backed up by a survey released by the Edelman Trust Barometer, which found that people trust the tech industry more than any other.
“The quality of earnings and fundamentals hasn’t changed for many tech companies, despite the share price falls,” Harris says.
“The tech sector has an impressive reputation for delivering returns on equity and strong balance sheets, two things that you want to look out for.”
Solar glass manufacturer ClearVue Technologies Ltd (ASX:CPV, OTCQB:CVUEF) is one such company, with its share price jumping an astonishing 40% so far this year.
ClearVue recently said its recently-completed archetype model building demonstrated how its product could achieve a net-zero or near-zero energy-use building.
The modelling was completed on a design in Toronto, Canada, and benchmarked against the Toronto Green Standard (TGS) from 2030 - one of the world’s highest standards of building performance.
Data security company archTIS Ltd has seen its share price grow by 8% in 2022 thus far, off the back of a strong finish to 2021.
The company raised A$6.9 million to fuel its growth in US and UK markets, as it seeks to explore and execute on a proven M&A strategy that strengthens the product offerings, customer and geographical expansion to drive greater ARR, and build pipeline and close opportunities with the Microsoft field through the existing IP Co-sell partnership targeting defence and other regulated industries.
Real estate software business Openn Negotiation Ltd (ASX:OPN) is another strong performer, gaining 12% this year.
- Daniel Paproth