ASX tech shares could be the sector to look at for opportunities in December 2021.
There has been a lot more volatility in recent months, which could mean better ideas for investors at better prices.
Companies in the technology sector can make it possible to achieve attractive margins and quicker growth.
These ASX tech shares could be opportunities this month:
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Xero Limited (ASX: XRO)
Xero is a leading cloud accounting software business which is providing services all over the world. It has sizeable subscriber numbers in New Zealand, Australia, the UK, the US, Singapore and South Africa. Total subscribers went up 23% to 3 million in the most recent result.
It's currently rated as a buy by the broker Credit Suisse with a price target of $160, which is more than 10% higher than it is today. The broker notes the strong margins at Xero. In the FY22 first half, its gross profit margin improved from 85.7% to 87.1%.
The growth of average revenue per user (ARPU) could be an important contributor to operating revenue going forwards. In HY22, ARPU increased 5% to NZ$31.32.
Xero continues to see its annualised monthly recurring revenue (AMRR) increase, showing what the next 12 months of revenue could be. HY22 AMRR went up 29% to NZ$1.13 billion.
The ASX tech share is going to continue to focus on growing its global small business platform and maintain a preference for re-investing cash generated, to drive long-term shareholder value. Historically, that seems to have worked with the Xero share price up more than 750% over the last five years.
Adore Beauty Group Ltd (ASX: ABY)
Adore Beauty is an e-commerce business which sells thousands of different beauty products through its website.
The company is currently rated as a buy by the broker UBS with a price target of $6. That's around 40% higher than it is today. The broker is expecting double digit revenue growth from Adore Beauty and its new private label brand products could be helpful.
Adore Beauty's FY22 first quarter showed ongoing revenue growth, active customer growth and returning customer spending. The revenue in the first three months of this financial year grew by 25%.
FY21 showed a number of different pleasing metrics, including annual revenue per active customer increasing $13 over the year to $219. The gross profit margin increased 1.2 percentage points to 33.1%.
Over the longer-term, the business is expecting scale benefits to increase operating leverage and deliver further earnings before interest, tax, depreciation and amortisation (EBITDA) margin expansion.
In the current financial year, it is focused on increasing its market share by building its range 'authority', providing an "exceptional" online transaction experience and increasing its content-led engagement.
