We’ve seen a strong recovery off of the lows for the Nasdaq-100 Index (QQQ), with the ETF up nearly 10% since late September and many growth stocks more than doubling this performance. While we continue to see significant complacency across most sentiment indicators, which suggests some caution is warranted, further weakness or a re-test of the September lows could set up an exceptional buying opportunity. Therefore, investors would be wise to begin building their shopping lists. In this article, we’ll examine two tech names with explosive sales growth that look to be under significant accumulation by funds…
While LivePerson (LPSN) and Farfetch (FTCH) have little in common, with one being a software name and the other being in the online retail space, both do share one common trait: explosive sales growth. This trait, combined with relative strength, is often a great predictor for strong outperformance vs. peers, and it helps both companies are also leaders in their space. In LivePerson’s case, the company’s Conversational Cloud is one of the hottest products on the market for medium-sized businesses and enterprises navigating away from call centers. LivePerson’s net revenue retention rate of over 110% is proof that existing customers are more than satisfied with its effectiveness.
Meanwhile, FarFetch offers customers the broadest range of products and categories from luxury fashion brands online, selling products from companies like Burberry, Prada, Jimmy Choo, Fendi, and Versace. The company’s acquisition of New Guards Group last year has increased its customer count to a whopping 2.5 million, giving it a commanding lead in the online luxury market. Let’s see what makes both of these companies so unique below:
Beginning with Farfetch, the $9 billion-dollar online retailer has seen exponential growth since going public in late 2018, with quarterly sales soaring from $134.5 million in Q3 2018 to estimates of $371.1 million in Q3 2020.
This translates to a compound annual sales growth rate of over 66%, which makes Farfetch one of the top-100 growth companies trading on the US market currently. In Farfetch’s most recent quarter, the company reported near-record sales of $364.7 million, translating to 74% growth year-over-year. It’s worth noting that the company was lapping a year of 43% growth, which means that the company’s two-year stacked growth rate comes in at an unheard of 117%.
In terms of Gross Merchandise Value [GMV], the company reported GMV of $721 million, up 48% year-over-year. Some investors might be turned off because this massive growth still led to net losses per share of $0.20, but estimates show that the company could be profitable by as early as FY2023 as it benefits from economies of scale.
When it comes to the technical picture, it’s hard to find many companies that hold a candle to Farfetch, with the stock building out a multi-year cup base since its IPO debut. Generally, these primary IPO bases can lead to explosive uptrends if they do breakout successfully, and Farfetch clearly has a catalyst for this breakout.
This catalyst comes in the form of market-leading sales growth and a push towards profitability in FY2023. The good news for Farfetch is that it’s in an area of the market that is less affected by the ongoing recession, with most of the customers buying luxury goods being in the higher-income categories. This is similar to what we’ve seen with…
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