The tech sector was one of the worst performing areas of the share market this week.
Because of this, I feel it could be an opportune time to take a look at a few quality long-term options in the sector.
Three at the small end of the market that I have my eye on are listed below:
ELMO Software Ltd (ASX: ELO)
One of my favourite small cap tech shares is ELMO Software. It offers a comprehensive suite of cloud-based human resources and payroll software solutions that can be easily configured to an organisation’s requirements. In FY 2018 the company experienced strong demand for its software, leading to ELMO achieving pro forma revenue of $31.9 million and pro forma SaaS revenue of $29.8 million. This was a significant jump from a year earlier and well ahead of its prospectus forecasts. Pleasingly, this is still just a fraction of the addressable market in Australia and New Zealand which management estimates to be worth US$770 million per year.
Megaport Ltd (ASX: MP1)
Megaport is a fast-growing tech company which provides elasticity connectivity and network services across a growing number of data centres. Its growing footprint and the popularity of its offering led to the company increasing its customer numbers by 41% to 1,038 in FY 2018. These customers include many blue chip companies such as Aon, Flight Centre Travel Group Ltd (ASX: FLT), and Vodafone. This jump in customers led to an even bigger lift in revenue to $19.8 million. I expect similarly strong growth in FY 2019 as its footprint grows and the cloud computing market expands.
Serko Ltd (ASX: SKO)
New Zealand-based Serko is a new addition to the ASX and could be worth a closer look. It provides travel and expense technology solutions to a growing number of companies including industry giant Flight Centre Travel Group. I believe that working with a company the size of Flight Centre is a testament to the quality of its offering and expect it to underpin its strong growth. Serko’s management expects revenue growth of up to 30% in FY 2019.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended ELMOSFTWRE FPO. 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 Scott Phillips.