OTHER BIG TECH COMPANIES
There is a multitude of other investments in the tech sector, with new listings are coming on stream all the time. But assessing the longer term growth prospects and valuations of these listings is not always a simple task. Tesla, for example, which is investing in the electric car, lifted revenue 73% to $7bn in 2016 and reported a net loss. Its share price trajectory indicates huge expectations, but analysts are divided on whether these will be realised. “From a valuation perspective, it is hard to get your head around it,” says Marc Talpert, global emerging markets analyst at Coronation Fund Managers. “It has changed the trajectory of the motor industry globally, but all the global companies are following suit.” There are also still serious limitations, like battery life and infrastructure bottlenecks, which have to be overcome. “A lot of optimism is built into the price – a lot of expectations, and if these are not met, there will be potential downside.” Snapchat, similarly, is difficult to value, says Talpert. While it is a rapidly growing business, “the core underlying utility for Snapchat is a little more unclear”. Talpert says Facebook is replicating a large portion of its functionality. “While this is a huge vindication of Snapchat’s strategy and design, its utility can be copied on other platforms with far greater scale, thus impacting their platform's long term growth.” Sean Ashton, chief investment officer at Anchor Capital, says Anchor likes Priceline, a global online travel booking company that owns booking.com and agoda.com, as it expects online travel bookings to continue to take a share of the market away from traditional travel agencies. “This business generates amazing returns on capital (35% ROE), high margins (30%) and we expect it to grow its profits by 15% annually,” he says, adding that it trades at a reasonable 23 forward P/E. Anchor is also invested in Activision Blizzard, which has some of the best online gaming franchises like Call of Duty and World of Warcraft. The company has a significant online user base which provides the opportunity to generate advertising revenues. Activision is likely to begin commercialising media rights to its eSports competitive gaming leagues. Talpert says Shopify provides a blueprint to e-commerce businesses, allowing users to participate in the online economy without the big upfront costs. Amazon has identified Shopify as a favoured partner in its marketplace business.