Griffin on Tech: Signs of life in listed Kiwi tech stocks
The S&P 500 crossed the 5,600 mark for the first time this week and the Nasdaq also touched a record high.
As is usually the case, tech stocks were responsible for the bulk of the rally, particularly semiconductor stocks. Anticipation of interest rate cuts in the US is also leading to a buoyant outlook for listed companies and their investors.
But the sky-high US stock markets seem at odds with the sluggish state of most national economies. The promise of AI and demand for the computer chips that run AI workloads has created a bubble with questions increasingly being asked about when AI will deliver actual gains for the economy at large.
At home, the Reserve Bank’s decision to hold the official cash rate at its current level here suggests we could see a cut in the near future. Some banks are already cutting their mortgage and term deposit rates. That hopefully signals some relief ahead for homeowners who have faced eyewatering mortgage payment increases in the last 18 months.
Our own stock market has reflected our recessionary environment, with the S&P/NZX index down 3% over the last three months. But our own listed tech stocks are outperforming the market, up 8% over the same period. I started my tech journalism career in the early 2000s writing about a group of listed tech stocks including IT Capital, Cadmus, E-cademy and Advantage that floated in the frothy dotcom boom but ended up as penny dreadfuls on the NZX.
NZX tech stocks after Xero
Since then, there hasn’t been much in the tech space to inspire investors, other than Xero, which consolidated its listing on the ASX in 2018. But an analysis from Forsyth Barr this week highlights some quiet tech achievers in our midst.
Chief among them is utilities software company Gentrack which now has a market capitalisation of $1.1 billion.
“Gentrack's (GTK) share price continued its rapid ascent after it reported strong revenue growth in 1H24 and upgraded FY24 guidance,” Forsyth Barr analysts wrote in their market update. It had positive returns of 22% in the three months to June 30 in terms of its share price value.
Fleet tracking company ERoad had the highest returns of tech companies at 49%, after a period of volatility during which it rejected a takeover offer. There are underperformers in tech too, including Rakon, Syft, and Smartpay.
A couple of emerging NZX-listed tech players are worth watching - Blackpearl Group and Being AI. We featured both of their CEOs recently on The Business of Tech podcast I co-host with businessDesk tech editor Ben Moore (listen to Blackpearl and Being AI). They are early stage and both leverage AI to a large extent. They have a long way to go to prove themselves, but I like the fact that they have pursued public listings as a way to raise capital.
Our sharemarket is not in great shape, with a dearth of new listings, companies delisting to head to the ASX and most tech companies opting not to take the public listing route, due to its higher compliance costs and required transparency.
We need a strong NZX. While it’s fine to load your Sharesies account up with tech stocks like Tesla, Nvidia, and Microsoft, we should have something inspiring to invest in on our own doorstep. Gentrack is showing that there are attractive, high-growth companies capable of doing this - we just need a lot more of them to give the NZX the critical mass it needs to generate more capital to help our innovative companies go global.
