I’m particularly bullish about UK tech stocks right now, and within technology there are three themes that I believe will grow substantially over the next five to 10 years: cybersecurity, robotics and artificial intelligence.
The company I want to write about today is Blue Prism (LSE:PRSM), which solidly ticks the robotics and artificial intelligence boxes. Blue Prism has been around for 20 years, and has been listed on the FTSE AIM since 2016. It specialises in Robotic Process Automation (RPA), which is a bit of a misnomer – think more digital workers removing mundane, repetitive tasks from humans than I, Robot here.
What’s the bull case for this UK tech stock?
The company released H1 financials (to the end of April) earlier this month and revenues had shot up by 70%. This follows a trend of roughly doubling revenue each year since 2017. Blue Prism now boasts 1,864 customers, which is 500 more than at the same point last year.
The company makes the vast majority of its money through licenses and has an encouraging recurring revenue of 98%. Importantly, the figures show the number of upsells to customers increased to 635. This is crucial because this represents the ability to scale its product to its existing customer base as well as add new customers.
What’s not to like?
Let’s address the elephant in the room: Blue Prism is loss making. The six-month financials showed an adjusted EBITDA loss of £30 million. This is not atypical of other technology companies in growth mode where large investment is required in marketing, sales and product to grow their customer base and business. That said, the UK tech stock reiterated its target to hit a cash flow break-even point in 2021, and the recent fundraising in April of £100 million has shored up its cash position.
A lot of growth is already reflected in the shares. Following a colossal rise in the share price, which peaked at over 2,500p a share in September 2018, the shares have since halved and are currently hovering around the 1,100p mark. The broker Canaccord recently lowered its rating of Blue Prism to a sell and slapped a target price of 1,050p on the stock.
But I think it is missing a trick here. Yes, there may be some short-term Covid-related volatility in the second half of the year, but longer term we are looking at a market leader in a growing industry. RPA is expected to be worth more than $10 billion by 2022, and the acquisition of Thoughtonomy in 2019 opens up its product to the small and mid-cap market. And that is why I believe that, over a five- to 10-year horizon, Blue Prism has the potential to double your money.
