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Should you buy these small cap tech stars?

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I think at the small end of the market there are a large number of tech shares that have the potential to grow significantly in the future.

Three that have caught the eye of the market this year are listed below. Should you buy their shares?

LiveTiles Ltd (ASX: LVT)

LiveTiles is a software company offering a digital workplace platform designed to increase collaboration and efficiency among users. Last month the company advised that its annualised recurring revenue (ARR) reached $18.6 million at the end of the September quarter, up 272% year-on-year. This strong growth is expected to continue in FY 2019 thanks to its sales and marketing investment, Microsoft co-marketing initiatives, and robust demand for recently launched artificial intelligence products. Looking further down the line, management is targeting ARR of $100 million by the end of 2021. While it is too soon for an investment for me, LiveTiles is certainly on my watchlist.

Megaport Ltd (ASX: MP1)

Megaport is a leading provider of elastic interconnection services in 234 data centres across the world. This morning the company was the subject of a reasonably positive broker note out of Goldman Sachs. Although Goldman only has a neutral rating on the company’s shares for valuation reasons, it notes that Megaport’s demand outlook is strong. With global data centre traffic tipped by Cisco to grow 3x by 2021, the broker believes Megaport’s first mover advantage will lead to it growing revenue by a CAGR of 50% through to FY 2021. While it certainly is a high risk investment, I do think Megaport could be worth a closer look given its positive long-term outlook.

Serko Ltd (ASX: SKO)

Serko is a New Zealand-based travel and expense technology solutions provider which could be a big winner from the tourism boom. Last week it released its half year results and revealed a 25% jump in revenue to $11.4 million. The drivers of this strong result were increased transaction volumes from existing and new customers, additional revenue from travel-related content, such as hotel bookings and airport transfers, and strong growth in its Expense platform revenue. This strong start to the year puts Serko in a great position to achieve its annual revenue growth guidance of between 20% to 30% in FY 2019. I think Serko could be worth considering with a long-term view.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

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