Why Zip (ASX:Z1P) and this beaten down ASX tech share could be buys

Zip Co Ltd (ASX:Z1P) and this beaten down ASX tech share could be in the buy zone now. Here’s what you need to know about them…

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The tech sector has been uncharacteristically out of form this year. While this is disappointing, every cloud has a silver lining. The silver lining here is that this weakness has dragged some tech shares down to very attractive levels for investors.  

Two ASX tech shares that are down heavily from their highs are listed below. Here’s why this could be a buying opportunity:

Altium Limited (ASX: ALU)

The Altium share price is down 39% from its 52-week high. This could make it one to consider for long term focused investors.

Altium is the electronic design software provider behind the Altium Designer and Altium 365 platforms. These platforms allow users to design the complex printed circuit boards found inside electronic devices.

Thanks to industry tailwinds that are underpinning growth in electronic devices globally, Altium appears well-positioned to benefit from increasing demand for subscriptions in the coming years.

And although the COVID-19 pandemic has softened demand, analysts at Citi believe investors should stick with the company. This is due to its belief that the downgrade cycle is now over and its growth will soon resume.

Citi recently retained its buy rating and $33.50 price target on the company’s shares. This compares to the latest Altium share price of $24.52.

Zip Co Ltd (ASX: Z1P)

Another tech share to look at is this buy now pay later provider. The Zip share price may be up 25.5% year to date, but it is down 51% from its 52-week high. While the latter is disappointing, it could be a buying opportunity for buy and hold investors due to its strong growth potential.

Zip has been growing at a rapid rate in recent years thanks to the growing popularity of the buy now pay later method and its international expansion. Positively, this strong form has continued in FY 2021. For example, during the third quarter, Zip reported an impressive 80% increase in group quarterly revenue to $114.4 million.

This was driven by a combination of customer growth and repeat usage. In respect to the former, at the end of the period, Zip had 6.4 million active customers globally. This was up 88% from the prior corresponding period and 12.3% from 5.7 million at the end of December.

Its growth was strongest in the United States, with its QuadPay’ business reporting transaction volume growth of 234% to $762 million, revenue growth of 188% to $54.4 million, and customer growth of 674,000 or 153% to 3.8 million. The good news is that this is still only a tiny fraction of a $5 trillion market opportunity in the United States. This gives it plenty of room for growth in the future.

Citi is also a fan of Zip. Last month its analysts upgraded the company’s shares to a buy rating with an $11.30 price target. This compares to the latest Zip share price of $7.02.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Altium. The Motley Fool Australia owns shares of Altium. 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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