These UK-based tech stocks seem to me like good discount buys right now following recent dips. That’s why I’m considering adding them to my portfolio this month.
Ocado
Ocado Group (LSE: OCDO) is primarily known for its online grocery operations.
Naturally, Ocado saw an influx of business in 2020 as more consumers and companies migrated online, making it a promising British investment for me. Its online grocery revenue grew by 35% to $2.18bn in 2020 thanks to an e-commerce boom driven by the pandemic. This figure is expected to increase if the habit of online grocery shopping remains sticky post-Covid.
The biggest threat to Ocado Group at the moment is increasing competition, I feel, including Tesco and Sainsbury’s. Should it lose ground to such competitors, the company’s bottom line could be at risk.
But I feel it has enough in its unique technology offer continues to grow. It has seen its stock price soar 54% in the past 12 months from 1,368p to 2,115p. However, with the Ocado share price down almost 15% to 2,115p from 2,481p in three months, I’m adding it to my watchlist as a discount buy.
Games Workshop
Games Workshop (LSE: GAW) is a British manufacturer of miniature wargames, best known for its ‘Warhammer’ series. This ‘nerdy’ company may not seem like a typical tech stock, but its 5m online users beg to differ. It’s one of the FTSE 250’s top performers of the past decade, soaring more than 1,800% in that time. And, the Games Workshop’s share price has soared more than 110% in the past year, from 4,896p to 10,402p today.
Operating profit doubled to £92m in the six months ended November 2020, while the company currently forecasts a repeat doubling of operating profit. Online channel revenue has also surged 87% as consumers continue to enjoy gaming during lockdown.
One major concern for me is that as lockdowns end, gamers who’ve come to the firm’s products anew could lose interest, resulting in a sales decline. The company has a big job ahead of it to maintain this strength. But with an expensive P/E ratio of 35, shareholders will need to see long-term growth potential in order to justify the price.
Yet I believe that Games Workshop has not yet scratched the surface of its online potential. That’s why I’m adding it to my watchlist now.
Blue Prism
Blue Prism (LSE: PRSM) makes robotics software in more than 60 countries and added 490 new customers in 2020, while maintaining a gross revenue retention rate of 98%. Its board has also discussed plans for a US listing, where it believes it could receive a higher valuation, based on recent performances of US-listed tech stocks that saw their share prices soar in the past year.
The company is currently valued at more than £1.25bn, and despite coronavirus-induced volatility in 2020, its share price has risen 15% in last year from 1,121p to 1,299p.
Its £40.3m 2020 losses are a concern for me. Although these losses had narrowed year-on-year, the company was forced to restate its financials in January, meaning that the actual loss was £5m higher than originally stated. Though this was just a once-off event, it isn’t a good look for the company and leaves a black mark on its record.
For now though, I’m giving Blue Prism the benefit of the doubt and adding it to my April watchlist.
