2 excellent ASX growth shares analysts rate as buys

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Big green letters spell growth, indicating share price movements for ASX growth shares

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There are a good number of growth shares to choose from on the Australian share market.

So many, it can be hard to decide which ones to buy ahead of others. To help narrow things down, I have picked out two ASX growth shares that have been rated as buys. They are as follows:

Temple & Webster Group Ltd (ASX: TPW)

The first ASX growth share to look at is Temple & Webster. It is Australia’s leading online furniture and homewares retailer with over 200,000 products on sale and 778,000 active customers at the end of FY 2021. The latter was a 62% increase year on year.

And while the pandemic certainly has given its growth a boost, Temple & Webster still has a very long runway for growth ahead of it. This is due to the accelerating shift to online shopping, its strong market position, and the low penetration of online furniture and homewares shopping.

In addition, management is investing heavily in its sales growth at the expense of margins. It believes this will allow Temple & Webster to cement its leadership position and leave it well-placed for long term growth.

Morgan Stanley is supportive of this strategy. So much so, the broker has an overweight rating and $16.00 price target on its shares.

Xero Limited (ASX: XRO)

Another ASX growth share that could be in the buy zone is Xero. It is a leading cloud-based accounting software provider for small to medium sized businesses.

Like Temple & Webster, Xero has been growing at a very strong rate in recent years. For example, in FY 2021 the company reported strong growth across all key metrics.

This includes a 20% increase in subscribers to 2.74 million, a 38% jump in total subscriber lifetime value (LTV) to NZ$7.65 billion, and a 17% lift in annualised monthly recurring revenue (AMRR) to NZ$963.6 million.

Management advised that this result reflects continued momentum in Australia and New Zealand together with a notable recovery across Xero’s International markets.

The good news is that Xero’s growth is only really getting started. In fact, management estimates that it has a total addressable market of 45 million subscribers globally. This means it has only captured 6% of the market at present.

Goldman Sachs is very positive on its future and expects its strong growth to continue throughout the 2020s. In light of this, it recently reaffirmed its buy rating and $165.00 price target on the company’s shares.

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Motley Fool contributor 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 and has recommended Temple & Webster Group Ltd and Xero. The Motley Fool Australia owns shares of and has recommended Xero. The Motley Fool Australia has recommended Temple & Webster Group 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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