ASX tech shares offer a lot of potential growth over the long-term. I think there are at least three tech ideas I'd be interested in buying for the next decade:
Kogan.com Ltd (ASX: KGN)
The e-commerce business has been a very strong performer during COVID-19 and it seems as though the difficult conditions have brought forward the adoption of online shopping.
I think the increase in online customers is going to stay and that makes Kogan.com a stronger long-term buy.
The latest update the market has seen from Kogan.com was the August 2020 numbers, following on from a big FY20. Over the month Kogan.com grew its active customers by 152,000 to 2.46 million. Gross sales went up 117% year on year, gross profit increased 165% and adjusted earnings before interest, tax and depreciation (EBITDA) surged 466% higher.
At the moment it's the ASX tech share's retail sales that are benefiting, but the longer-term opportunity is Kogan.com's other services like insurance, telecommunications and money services. If the e-commerce business can convince customers to use more services then the profit margin on each customer will increase, significantly helping organic revenue. Network effects can be very powerful.
Over the years I think more of the population will shift to digital, which makes this ASX tech share an appealing idea. The Kogan.com share price is currently trading at 45x FY21's estimated earnings.
Redbubble Ltd (ASX: RBL)
Redbubble is another ASX tech share that's benefiting from the shift to online shopping. It's one of the world's biggest artist marketplace businesses. It also operates TeePublic, which is another marketplace.
This is the type of situation where having the most popular platform can be really beneficial because it means more buyers and sellers will want to go to Redbubble's platform, continuing the cycle.
Over the long-term the ASX tech share is aiming for $1 billion of revenue, which would help it become a much larger business. Redbubble seems like a very scalable business. In FY20 it grew marketplace revenue by 36%, gross profit increased 42% and operating earnings before interest, tax, depreciation and amortisation (EBITDA) jumped 141%.
FY21 started off strongly with July marketplace revenue growth of 132%, which says that this financial year could be another strong year.
Over the long-term, Redbubble could become a much more profitable business thanks to more product lines and growing economies of scale.
Pushpay Holdings Ltd (ASX: PPH)
The ASX tech share is one of the fastest growing businesses on the ASX right now. In FY21 it's expecting to at least double its earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) to US$50 million. Management have predicted that EBITDAF could reach as high as US$54 million.
COVID-19 has brought forward the adoption by large and medium US churches of Pushpay's digital giving software. Pushpay is providing a very useful service in this period of social distancing and uncertainty. Livestreaming is one of the services that Pushpay provides it clients through its platform.
In FY20 Pushpay achieved revenue of US$129.8 million, but it's actually aiming for US$1 billion of revenue over the long-term. Management think the US church opportunity is that large.
I think Pushpay is a great ASX tech share to own for the long-term because its profit margins seems as though they can go much higher. In FY20 its gross profit margin increased from 60% to 65% and the EBITDAF margin rose from 17% to 22%. Over the next five years the company could become much more profitable. This should really help the Pushpay share price to grow strongly.
Over the next decade the ASX tech share's margins could rise substantially and its earnings could diversify if it materially expands into different additional markets.
At the current Pushpay share price it's valued at 38x FY21's estimated earnings.
