This ASX tech share is still cheap to buy

Here’s one Australian fintech that’s still good value, according to a fund manager. And another that’s popular but not worth touching.

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Wilson Asset Management equity analyst Sam Koch has revealed one tech stock that’s a good buy at the moment.

Technology companies have gone gangbusters this year, so most are inflated in value. But Koch reckons Tyro Payments Ltd (ASX: TYR) still has legs.

Wilson sold out of Tyro in February, and the share price was subsequently hammered during the COVID-19 downturn.

“What the market is missing, however, is the structural shift towards card payments away from cash, which will drive Tyro’s earnings growth,” Koch told an investor call.

“Currently trading at a 40% discount to international peers, we believe this evaluation gap will close as we emerge from lockdown and more people use card over cash.”

Wilson currently has a price target of $4.30 to $4.50 for Tyro, which closed at $3.30 on Thursday.

Tech shares to stay away from

Wilson Asset Management lead portfolio manager Oscar Oberg said its flagship fund WAM Capital Limited (ASX: WAM) had sold out of the tech industry this year, going from 10% of its portfolio down to about 6%.

WAM Capital had done pretty well out of stocks like Appen Ltd (ASX: APX), but it sold the company this year because “expectations were just sky-high”.

According to Oberg, it and Afterpay Ltd (ASX: APT) are typical of the current hype around technology.

“You can’t just look at companies like Afterpay, which went from $8 to $90, and think that’s the new normal,” said Oberg.

The Appen share price was up 3.21% to close the day at $32.51 on Thursday.

When asked about Kiwi software maker Xero Limited (ASX: XRO), Oberg said he would stay away.

“Xero is an exceptional global growth story,” he said.

“At this stage we believe Xero is probably fair to overpriced… Unfortunately at the [current] valuation, not attractive.”

Xero’s share price is up about 17% from the start of the year, even after a correction the last 8 days.

Tony Yoo owns shares of AFTERPAY T FPO, Appen Ltd, WAM Capital Limited, and Xero. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Tyro Payments and Xero. The Motley Fool Australia owns shares of AFTERPAY T FPO 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 Scott Phillips.

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