2 UK Tech Stocks to Watch in 2023
When people think of technology stocks, their mind inevitably turns to US titans of the industry, such as Apple, Microsoft and Amazon. However, on the other side of the Atlantic, London is home to many other promising tech stocks.
Whilst these UK tech stocks may not match the enormity of their US counterparts, it is a British industry which has grown and flourished in recent years. In this article, we will take a look at 2 UK technology stocks to watch in 2023.
UK Tech Stocks to Watch
The UK technology sector has expanded considerably in recent years and there are a number of exciting UK tech stocks which have recently made their debut on the London Stock Exchange (LSE).
In the following sections, we will take a look at 2 UK technology stocks which have attracted considerable attention since their stock market bows in 2021.
Formally known as TransferWise, Wise is a financial services company which specialises in international remittances. Besides remittances, it also allows accountholders to hold their money in 50 different currencies or invest it in a global index fund.
However, despite the name change, Wise’s core business remains international transfers. As well as offering these transfers at a more competitive rate than high street banks, they claim to be 6 times cheaper on average, many of their transfers are considerably quicker as well – with 49% of transfers taking place instantly and 88% within 24 hours.
Their services have proved popular, with more than 13 million customers around the world transferring an average of around £6 billion a month. In the most recent quarter, ended 30 September 2022, Wise handled a total of £27 billion worth of transfers, an increase of 50% year on year (YoY).
This increase in transfer volume coupled with considerably higher net interest income, thanks to higher rates, helped drive total income for the quarter up 73% to £229 million.
The international remittance market is incredibly big business, with many migrant workers regularly transferring money back to family members in their native country. In May 2022, the World Bank estimated that remittance flows to low and middle-income countries would total $630 billion in 2022.
In their full-year 2022 results, Wise reported handling a total of £76 billion in transfers, demonstrating that they still have ample room to grow in this market. Their international reach and partnerships with challenger bank Monzo and Google Pay would suggest they’re well-placed to continue to grow.
Darktrace is a cybersecurity company that is pioneering the Artificial Intelligence (AI) approach to cyber safety with a product which is “self-learning”.
The software learns to detect abnormal activity in a system which, when identified, is analysed and dealt with. After the threat is resolved, the AI technology will remember how to defeat that type of threat in the future thus growing more capable with each new threat which is vanquished.
Just reading about their product and how it works explains why this UK tech stock, together with Wise, was one of several recent high profile London listings which generated excitement in the City.
Whilst, naming no names, some of these listings failed to live up to the hype, Darktrace performed exceedingly well on its stock market debut. Share price soared more than 180% in its first five months on the LSE; however, interest subsequently cooled and share price is currently sitting at around the same level as its first day’s closing price.
Is this a fair reflection of the company’s value or has the Darktrace share price been a victim of wider stock market issues? The answer to that question is: probably a bit of both.
In 2021, at the time of Darktrace’s Initial Public Offering (IPO), investors were very keen on tech growth stocks which promised big potential profits in the future, but little in the way profitability in the present. Many tech stocks, like Darktrace, consequently surged in value.
But, at some point, many of these stocks reached a valuation which just wasn’t justified by present fundamentals. This, combined with rising inflation, the prospect of higher interest rates and an increasingly gloomy economic outlook, led to the revaluation of many stocks, as investors began to prioritise present profitability over future potential. Which brings us to where we are today.
The price chart of Darktrace paints a picture of a technology stock which is not for the fainthearted.
Nevertheless, the company operates in an exciting sector. As more and more of our daily life moves into the digital world, it stands to reason that we will become more vulnerable to cybercrime. Consequently, cybersecurity is likely to grow to continue to help keep people and businesses safe.
Darktrace currently has over 7,400 customers in over 110 countries. Amongst those customers it counts a number of high-profile organisations, including the NHS, Rolls-Royce and BT. This suggests that Darktrace’s AI technology is not just a gimmick, but actually works and works well enough that big companies are willing to pay for it.
In the company’s full year ending 30 June 2022, revenue jumped 45% to $415 million and increased again in the latest quarter (ended 30 September 2022) by 13.4% YoY. The company posted a full year net profit of $1.5 million, although this became a loss of $2 million when factoring in foreign exchange transactions from its overseas operations.
Whilst Darktrace looks to be one of the UK tech stocks to watch in the future, its low profitability and apparent vulnerability to fluctuating exchange rates suggest we should approach it with caution in the current climate.
The prudent thing to do here might be to wait and see how the company copes with the economic storm which is brewing. This should give more of an indication as to whether Darktrace is a good long-term prospect.
How to Invest in UK Technology Stocks
With an Invest.MT5 account from Admirals, investors can buy shares in Wise and many other UK tech stocks. In order to start investing, follow these 4 steps:
- Open an Invest.MT5 account
- Log in to the Trader’s Room, find your account details and press ‘Invest’ to open the MetaTrader Web Terminal
- Search for your stock in the Market Watch and drag its symbol onto the chart space to open a price chart
- Right click on the chart, select ‘Trading’ and ‘New Order’ to open an order window. Here, you can enter the number of shares you wish to purchase before hitting ‘Buy’ to send your order to the market.
Investing with Admirals
An Invest.MT5 account allows you to buy shares in over 4,500 companies from around the world as well as more than 200 Exchange-Traded Funds (ETFs). Other benefits of the account include:
- The ability to invest with fractional shares
- Exclusive access to our Premium Analytics portal
- Regular market analysis at no additional cost
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