ASX tech shares have been punished in the last two months amid a wide sell-off in high-growth stocks.
While investors have thrown support behind the ASX tech sector this week, it remains downbeat for the year. The S&P/ASX All Technology Index (ASX: XTX) is up more than 4% since Friday's close. However, it has slipped around 8% in the past month and 12% this year.
As a result, the Australian tech sector has collapsed 17% over the past 12 months, making it one of the worst-performing sectors in that time.
With earnings season in full swing, many of the Aussie tech names are on the block as investors begin to peel back the layers on company fundamentals with the market volatility.
Analysts at Macquarie have done just that in a recent note, having scrutinised a few key ASX tech shares in the process. Let's take a look.
What's the outlook for ASX tech shares in 2022?
Macquarie has taken note of the recent downturn in the ASX tech basket and is now tilting its posture towards more defensible names.
In fact, the broker is downbeat on the upcoming round of earnings reports from Australian tech stocks. It reckons the sector will display an underwhelming set of results, given the challenges posed by COVID-19 and the Omicron variant.
It notes its favourite pick among the tech stocks, Megaport Ltd (ASX: MP1), has lost around 33% of its value in the past few months after melting off a previous high of $21.88 back in November.
However, with the release of Megaport's fairly robust earnings yesterday, shares have popped from a low of $13.25 and are now trading 11% higher at $14.68 apiece.
The broker also likes independent data store operator NextDC Limited (ASX: NXT) on a number of fronts and rates it a buy to clients, valuing the company at $16 per share.
On the other hand, Macquarie has reservations on a number of other ASX tech shares. It notes that, as an aggregate, its internal revenue and earnings before interest, taxes, depreciation, and amortisation (EBITDA) forecasts for the sector are now 5%–7% below consensus estimates.
Specifically, the broker is bearish on Altium Limited (ASX: ALU), Appen Ltd (ASX: APX), and Xero Limited (ASX: XRO), valuing each of these stocks at $27.10, $9.50, and $130 per share respectively.
For each of these names, these price targets represent considerable downside potential, Macquarie says.
One smaller ASX tech share Macquarie is also bearish on is Nearmap Ltd (ASX: NEA), rating it to underperform with a $1.30 per share price target.
Fellow broker Citi holds the opposite side of the coin in Appen's case, rating the artificial intelligence data services company to outperform in 2022. It values the company at $8.66 per share in a recent note to clients.
Funnily enough, Citi also recommends Macquarie Group Ltd (ASX: MQG) shares are a buy right now and sees the company is worth north of $225 per share.
So far this year to date, both Nearmap and Appen are trading well below the tech sector, whereas Xero and NextDC are tracking largely in line with the index, as shown on the chart above.
Megaport and Altium are the star performers among ASX tech shares in the last 12 months judging from this data.
