One area of the market which has performed very strongly in recent years, and has been tipped to continue doing so in the future, is the tech sector.
In light of this, it is no surprise that tech shares are among the most popular shares on the local share market.
With that in mind, I have picked out two shares in the sector that come highly rated right now. They are as follows:
Altium Limited (ASX: ALU)
Altium is a leading printed circuit board (PCB) design software provider. It is best known for its industry-leading Altium Designer and cloud-based Altium 365 platforms but also has a number of other growing businesses. These include the Octopart search engine for electronic parts and the Nexus team-based PCB workflow solution.
Due to the proliferation of electronic devices because of the rapidly growing Internet of Things and artificial intelligence markets, management is aiming to more than double its revenue between now and 2025/26. It is also believes that when it gets to 100,000 subscribers, double its current subscriber base, it will be in a position to dominate the industry.
These plans appear to have gone down well with analysts at Morgan Stanley. They have an overweight rating and $40.00 price target on the company's shares.
Xero Limited (ASX: XRO)
Xero is one of the world's leading cloud-based business and accounting software platform providers. Over the last few years the company has evolved from being a place to do your accounts, to a full-service small business solution.
This has helped underpin significant subscriber and recurring revenue growth. For example, during the first half of FY 2021, Xero finished the period with 2.45 million subscribers. This led to it reporting a 21% increase in operating revenue to NZ$409.8 million and a 15% lift in annualised monthly recurring revenue (AMRR) to NZ$877.6 million.
One broker that is confident there will be more of the same in the future is Goldman Sachs. This morning it initiated coverage on the company with a buy rating and $157.00 price target. Goldman believes Xero can achieve a 2030 subscriber footprint of 7.4 million and generate NZ$3.4 billion in annual revenue.
