AFR Article featuring CIO Sean Sequeira on Xero – Tech rally sorts the best from the rest

By Tom Richardson
Australian Financial Review – Jun 24, 2020

Appen and Afterpay are at new highs again, the local vanguard of a buying frenzy that drove the Nasdaq to another record overnight, as investors continue to pile into the technology stocks that embody the digital shift from COVID-19.

Tech’s stunning rise, with the ASX tech index up 83 per cent since March and the Nasdaq up 48 per cent, has dumbfounded critics who argued a market shock would demolish high valuations, with the combination of falling interest rates and rocketing demand for digital connectivity sending more investors into the sector.
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Sean Sequeria, the chief investment officer at Eagle Asset Management, is also bullish on Xero and said delaying price rises from July 1 was the right strategy.

“You don’t want to stick your head up in a difficult market. So we understand why they did that,” he said.

“If the client base is quite sticky it means the value of each dollar’s revenue is higher than cyclical companies’.”

Mr Sequeria said the market liked to value Xero on the calculated lifetime value of its client base and revenue multiples, so the stickiness of its client base made up its outer moat.

“If you want to use the example of Facebook and MySpace, no one wants to be the MySpace of the tech world. Really it was a fight for eyeballs,” he said.

According to Mr Sequeria, Xero can harness data like Facebook to provide its next growth leg, with the stock fairly valued now.
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Please click on link below for full article

https://www.afr.com/markets/equity-markets/tech-stock-surge-leaves-altium-stranded-20200622-p5550z

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