The Avast (LSE: AVST) share price led the day’s FTSE 100 risers in early trading Wednesday. As I write, International Consolidated Airlines, which has had a few good days, has taken the top spot. But Avast shares are still up 2.5%, so what’s happening?
First, what is Avast? The company bills itself as “a global leader in digital security and privacy products.” Online security concerns are growing pretty much daily. And I reckon that could be a good industry to be in for the next decade. But what of Avast itself? The Avast share price has put on 56% over the past two years. But in the latter 12 months of that, we’ve seen a gain of only 8.5%.
After investors hit the panic button when Covid-19 struck and dumped all their risky FTSE 100 shares, a chunk of that cash went into pandemic-safe stocks. Well, ones that investors thought fitted the bill, anyway. The firm’s shares climbed rapidly, but peaked in August. Since then, the Avast share price has given up a lot of its gains, while depressed companies are coming back. It all looks to me like a classic example of investor overreaction, followed by a slow reversion to the norm.
Where is the FTSE 100 value now?
That provided some great buying opportunities for bombed-out FTSE 100 stocks early in 2020. I can’t help thinking the same about those slowly deflating high-flyers now. And I’m tempted to add Avast to my ISA candidates list for 2021. Anyway, what news is there behind Wednesday’s price gain?
Avast has just announced a “strategic partnership with PMovil, an industry leader in direct carrier billing and alternative payments in Latin America.” The deal means that “Avast’s subscription-based solutions will be available via direct carrier billing for over 400 million customers of PMovil worldwide.”
From a UK perspective it seems strange, but it appears that 76% of Latin American consumers do not have access to debit or credit cards. That must make online purchasing pretty tricky. And it could generate significant demand for Avast’s payment services. The company’s offering of “the option of breaking down the cost into more affordable monthly payments” sounds to me like a potential substitute for credit cards.
Avast says: “Direct carrier billing is quickly emerging as a leading alternative payment, especially in emerging markets, where many are unbanked.”
Any tech risks here?
What are the risks? Firstly there’s the common risk associated with high-flying tech stocks in general. Since IPO in May 2018, the Avast share price has almost doubled, driving it into the FTSE 100. That’s all fine when the news stream is positive. But if a set of results should fail to meet expectations, investors can run for the hills. On that score, I generally prefer to buy into growth shares after they’ve had their first few ups and downs.
What else could go wrong? We’re looking at security technology here, and how well it can stand up to attack by hackers. I’ve no reason to doubt the quality of Avast’s offerings. But even one security breach could surely cause a share price crash. A fear like this might be overdone, but it will be at the back of my mind as I dig deeper to try to decide whether to buy.
Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Avast Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.