This is the season of improved corporate performance. Comparisons with a weak period last year and the reopening of society have helped this trend. And some sectors have seen genuine demand increases over the past year too. Two UK shares to benefit from these trends are wine company Naked Wines (LSE: WINE) and chip-maker Alphawave (LSE: AWE).
Naked Wines: strong sales growth
Naked Wines reported a 68% increase in sales for the year ending March 29. As more people made online purchases, the company, which funds wine producers and sells online, gained. I would be concerned about its net loss in other circumstances. But it explained that it was due to a big rise in investment in new customers. Also, its profits from repeat customers have strengthened significantly.
It is also positive on its outlook. In fact, it is one of the few companies I have covered recently to have provided concrete guidance in an uncertain year. This reflects its confidence to me. I think improved numbers will be supported by economic growth. Naked Wines is focused on the US market, which contributes to around half its revenues. The US economy is going strong and that is likely to continue.
The one risk I see is that as consumers step out more to wine and dine, there could be a slowdown in demand for online orders. But since overall consumer demand should rise, that issue may have little impact. I think the risk is limited.
Alphawave IP: future positive
Alphawave IP is another company to release a positive update. The chip-maker provides high-speed connectivity solutions to data centres. These are for 5G wireless infrastructure and autonomous vehicles, among other uses. It reported “record results” regarding the number of bookings earlier today. For the first half of 2021, the Canadian company booked orders of $190m. This included both new wins and business with existing customers.
The company, which was listed on the London Stock Exchange’s main market only a month ago, saw explosive growth in 2020. From the numbers for 2021 so far, it looks like this year will also be a good one for the company. Alphawave IP’s share price is up over 2% in today’s trading on the news, indicating renewed investor interest in the stock.
In the days following its weak initial public offering (IPO) in the UK last month, its share price fell and remained relatively muted. However, today’s news could mark a break in that trend. But it remains to be seen what happens next. Even with the gains made so far today, its share price is still below the 380p levels seen shortly after it was publicly listed.
My takeaway for the UK shares
On the whole, both UK shares look good to me. There are of course downsides to keep in mind. But I think both are growing companies that could prove to be lucrative investments over the next few years for me.