2 ASX tech shares rated as buys by brokers

Brokers have rated these 2 ASX tech shares as buys. One of those is data centre business Nextdc (ASX:NXT) and fintech Hub24 (ASX:HUB).

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ASX tech shares are some of the most sought after businesses by investors. They have the ability to earn high margins and potentially make good returns.

Brokers are always evaluating businesses, including those in the technology sector. If the broker thinks they’re good value for the next 12 months, then the broker will rate that company as a buy.

These two are ones that made the cut as buys:

Hub24 Ltd (ASX: HUB)

This fintech offers a number of financial services. Its investment and superannuation platform offers a range of investment options, with transaction and reporting options for all types of investors – individuals, companies, trusts, associations or self-managed super funds.

Hub24 says that it’s appealing for advisers and clients because of the choice and innovative products that it provides, which creates value.

It’s currently rated as a buy by Citi, with a price target of $26.40.

A couple of months ago the ASX tech share reported its FY21 half-year result to 31 December 2021. It reported that platform funds under administration (FUA) increased by 39% to $22 billion (and had increased another $2 billion to $24 billion). This included a half-year record of net inflows of $3.1 billion, up 24%.

It reported that total FUA, including the portfolio administration and reporting service (PARS) from Ord Minnett, rose to $31 billion.

All of the FUM growth helped the other financial statistics. Platform segment revenue increased 25% to $43.8 million. Platform underlying earnings before interest, tax, depreciation and amortisation (EBITDA) rose 26% to $17.4 million.

Underlying net profit after tax (NPAT) went up 39% to $7.5 million. Statutory profit was $6.1 million after excluding costs related to acquisitions.

The company expects to continue its growth and has increased its FY22 target platform UFA range to $43 billion to $49 billion.  

On Citi’s numbers, the Hub24 share price is valued at 53x FY22’s estimated earnings.

Nextdc Ltd (ASX: NXT)

Nextdc is the owner and operator of high quality data centres. It says that it’s a data centre-as-a-service provider, building the infrastructure platform for the digital economy, delivering the critical power, security and connectivity for global cloud computing providers, enterprise and government.

Its cloud partner ecosystem is Australia’s most dynamic digital marketplace, comprising more than 600 carriers, cloud providers and IT service providers. It enables local and international customers to source and connect with cloud platforms, service providers and vendors to scale their IT infrastructure services.

There has been a significant increase in demand since the COVID-19 pandemic started as many businesses and organisation shifted their IT online.

Citi also rates Nextdc as a buy, with a price target of $14.45.

The ASX tech share’s half-year FY21 result was stronger than the broker was expecting, with more growth expected in the coming years.

Half-year data centre revenue grew 27% to $121.6 million. Underlying EBITDA went up 29% to $65.7 million and operating cashflow went up 219% to $44 million.

Over the 12 months to 31 December 2020, contracted utilisation went up 33% to 71MW and the number of customers went up 16% to 1,465.

Based on the strong level of demand, Nextdc increased its FY21 guidance for underlying EBITDA to a range of $130 million to $133 million.

Management said that second half sales had already exceeded expectations and it’s expecting further strong demand for its data centres into FY22.

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Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Hub24 Ltd. The Motley Fool Australia has recommended Hub24 Ltd. 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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