2 ASX tech shares rated as buys by brokers

These 2 ASX tech shares have been rated as buys by brokers, including the electronic PCB software business Altium Limited (ASX:ALU).

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Some ASX tech shares have been rated as buys by multiple brokers, which may indicate a possible opportunity for investors.

These two businesses could be interesting ideas over the next 12 months considering the price targets of some brokers on them:

Altium Limited (ASX: ALU)

Altium is currently rated as a buy by at least four brokers at the moment. Some of those buy ratings have quite sizeable returns expectations.

For example, Morgan Stanley has a price target on Altium of $37 – that suggests a potential upside of not far off 40% over the next 12 months.

Citi is another broker with a buy rating on Altium, the price target is a more modest $33.50.

What is Altium? It’s a global software business that focuses on electronics design systems for 3D PCB design and embedded system development. Its software is used by world-leading electronic design teams as well as the grassroots electronic community.

Altium offers a number of different solutions for clients included Altium Designer, NEXUS, Ciiva and Octopart.

Growing Altium 365 is a key part of Altium’s future. It’s the cloud offering from the company which allows teams to easily collaborate and access their work from anywhere. That is useful in this current COVID-19 pandemic environment that the world is in.

The ASX tech share is planning for Altium 365 to be used for the dominance and industry transformation.

Altium CEO Mr Aram Mirkazemi said:

Altium 365 is key to our future success through indirect monetization from our CAD software tools and, in time, direct monetization from the broader ecosystem. I am most heartened by the strong adoption of Altium 365 and, with our Netflix organizational changes behind us, I am confident of a much stronger second half. Early signs are positive for this.

According to Citi, the Altium share price is valued at 64x FY21’s estimated earnings.

Nextdc Ltd (ASX: NXT)

Nextdc is a business that is rated as a buy by at least six brokers.

There are also some hefty price targets for the national data centre operator. For example, the broker UBS has a price target on Nextdc of $15.40. That suggests a potential upside of more than 40% over the next 12 months.

The broker notes that there is a lot of demand in key markets for Nextdc. The first half of FY21 was better than expected.

That half-year result showed data centre services revenue grew 27% to $121.6 million. Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) increased 29% to $65.7 million. Operating cash flow went up by 219% to $64.1 million.

The data centre business pointed out that whilst COVID-19 has presented headwinds for many businesses and industries globally, it continues to be a positive catalyst for digital services and technology providers supported by its data centre platform.

Based on the current billing and contracted utilisation levels as well as expected new customer contracts during the second half of FY21, Nexdct is now expecting FY21 underlying EBITDA to be in the range of $130 million to $133 million, whilst data centre services revenue is expected to be in the range of $246 million to $251 million.

The business is expecting further strong demand for its premium data centre services into FY22.

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Tristan Harrison owns shares of Altium. 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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