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Why these are my favourite tech shares on the ASX

Although the U.S. is home to many of the biggest and most well-known tech companies in the world, Australia is certainly no slouch.

I think the Australian share market is home to a good number of exciting tech shares with bucketloads of potential. Three of my favourites include:

Although the Altium Limited (ASX: ALU) share price has rallied strongly in the last three months, it is still around 12% off its 52-week high. I think this could make it an opportune time to invest in the printed circuit board (PCB) design software provider. Especially with demand for its software expected to grow substantially over the next few years. Research firm Gartner expects there to be 20.8 billion connected devices in use globally by 2020, up from an estimated 6.4 billion in 2016. As PCBs are required in the majority of these connected devices, Altium stands to profit greatly.

The Appen Ltd (ASX: APX) share price has jumped around 37% this month thanks to an incredibly positive trading update from the data solutions and services provider. That update revealed that strong demand for its services has led management to expect full-year EBITDA growth of between 40% and 50% on last year’s result. Previous guidance given in February was for mid to high teen EBITDA growth this year. While its shares are no longer a bargain buy, I still think they are a great option for patient buy and hold investors.

Although the Nextdc Ltd (ASX: NXT) share price has gone gangbusters this year and climbed a remarkable 24%, I don’t believe it is too late to invest in the data centre operator. Demand for its services is predicted to rise considerably over the next decade as more and more businesses turn to the cloud. Whilst its shares may be expensive, it is worth remembering that the company recently posted a whopping 110% increase in half-year EBITDA to $23.9 million. I believe this and its growth prospects justify paying a premium to own its shares.

Whilst I believe Appen and Altium are great ideas for buy and hold income investors as well, their dividend yields are not the strongest at this point. Investors looking for a huge yield and strong growth prospects might be better off with this quality dividend share instead.

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Motley Fool contributor James Mickleboro owns shares of Nextdc Ltd. The Motley Fool Australia owns shares of Altium and Appen Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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