2 beaten-up ASX shares that could be buys in June 2021

Two ASX shares have been knocked down, but they might get up again.

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Some ASX shares have taken a hit in recent weeks and they might be opportunities for investors looking for businesses that can grow revenue quickly.

COVID-19 caused a boom in e-commerce sales for some ASX stocks. But lower share prices might mean long-term opportunities:

Kogan.com Ltd (ASX: KGN)

Since 25 January 2021, the Kogan share price has more than halved. Over the last month alone the share price has dropped around 10%.

Investor confidence about the business has dropped off as Kogan disclosed demurrage costs, excess inventory and a slowing growth rate.

To ease the inventory problem, Kogan is planning increased advertising spending and more discounting. This could cause margins to decline in the second half of FY21. That's why the company provided FY21 guidance for adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) to be in a range of between $58 million to $63 million. The company warned that it operates in a "highly dynamic" trading environment with trading conditions subject to continual change.

However, investors may remember that prior to the issues felt in the last few months, the business had been reporting continuing profit margin improvements across the board as it benefited from operating leverage from increasing scale.

The ASX share said that the longer-term fundamentals for the business remain very attractive given the company's position in the Australian and New Zealand online retail markets, and with online retail sales currently accounting for only a small percentage of total retail sales in Australia and New Zealand.

Kogan said it has learnt valuable lessons over the last few months about how to better scale operations. In the third quarter of FY21 it saw gross sales increase by another 47% compared to the prior corresponding period.

Temple & Webster Group Ltd (ASX: TPW)

Temple & Webster has seen a 8% decline of the share price over the last month and a 27% decline since 25 January 2021.

The business sells hundreds of thousands of different products through a drop-shipping model where products are sent to customers by suppliers directly, which should lead to faster delivery times and reduce the need to hold inventory. This should mean it can sustain a larger product range.

Despite cycling against a very strong comparable period, Temple & Webster is still reporting growth to the market. In the three months to 31 March 2021, it saw revenue growth of 112%. In April 2021, the ASX share generated revenue growth of more than 20%.

The business is expecting a long-term trend of continued online sales growth. It estimates than more than a fifth of furniture and homewares were bought online during 2020 and the company believes that Australia is on track for the same trajectory. In 2020, it's estimated that around 9% of Australian furniture and homewares were bought online, almost double that of 2019.

Temple & Webster thinks that both Australia and the US will see online penetration increase "significantly".

To capture this opportunity, the ASX share is going to invest across the business to win higher market share. It's going to invest in marketing, ensure competitive pricing, invest in a better customer research and buying experience, grow its product range, offer more private label options and launch exclusive ranges with suppliers.

Temple & Webster is committed to remaining profitable even during this investment phase. So it's expecting strong double digit revenue growth, but the EBITDA margins will be between 2% to 4% for the next few years.

After that, increased scale will result in higher profit margins for the business.

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd and Temple & Webster Group Ltd. The Motley Fool Australia has recommended Kogan.com ltd and Temple & Webster Group Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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