Down 35% in a month, why Motley Fool analyst Benny Ou says this ASX tech share is now a bargain buy

Why Whispir is on the table as a buying opportunity for this expert…

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As the saying goes: there’s no such thing as easy money — and 2022 has been a case in point for ASX tech share investors. Since the beginning of the year, the S&P/ASX 200 Info Tech Index (ASX: XIJ) has fallen 25%, while some of the former high flyers have fallen the hardest.

One company caught in the unfortunate shift in sentiment has been communications software-as-a-service (SaaS) company Whispir Ltd (ASX: WSP). In the space of one month, the Whispir share price has shaved off nearly 39% of its value.

However, Motley Fool analyst Benny Ou recently sat down with chief investment officer Scott Phillips to explain how the downtrodden tech name could now be a worthwhile opportunity. The discussion took place as part of The Motley Fool’s Stock of the Week series.

Let’s dive into the details.

Why the Whispir share price might be compelling

Although this ASX tech share has been battered and bruised recently, Ou sees numerous reasons to be bullish on Whispir. Outlining his case, Ou says:

Its differentiated business model is actually driving higher organic growth. Over the last three years, its compounded annual growth rate for revenue is over 37%, which is phenomenal. And recently, in its half-year result, it continued to demonstrate an acceleration of this growth.

The results being referred by Benny Ou landed on 22 February, showing a 70% increase in Whispir’s revenue to a record $39.4 million. On this, the Motley Fool analyst shared his belief that the company’s low-code/no-code platform is driving further adoption.

Importantly, this means companies looking to improve their internal and external communications can do so without the need for an in-house developer.

On top of this, a large addressable market has Ou excited about a long runway of growth. Namely, the niche communication platform as a service market, which is expected to reach US$8 billion by 2025.

Not only that, this ASX tech share has a presence in three distinct markets: Australia and New Zealand; Asia; and North America. However, it is North America that offers “huge potential”, according to the Motley Fool analyst.

Following on from here, Ou highlighted that Whispir’s CEO and founder, Jeromy Wells has skin in the game. With around a 14% stake in the company, there are plenty of reasons for Wells to ensure the success of the business.

What about the risks of this ASX share?

As always, this ASX tech share is not without its risks. Firstly, Ou addressed the elephant in the room — Whispir’s cash burning.

While management has mentioned it foresees the company reaching breakeven in the next two years, if this target isn’t met, it could be detrimental to the share price.

In a similar vein, the possibility for future capital raising could be a risk, as Ou notes:

[…] the company needs to maintain, in my view, a strong cost discipline while it’s continuing to accelerate growth, and this will need to be regaining a lot of investor confidence. So management, however, doesn’t plan to raise capital to fund its existing growth expansion strategy. However, I think this can’t be ruled out entirely.

Lastly, the competitive landscape in North America creates execution risk around Whispir’s greatest potential growth driver. A misplaced step in this market could “dramatically reduce the company’s growth potential in the future”, says Ou.

All in all, the analyst considers this ASX tech share a compelling opportunity at current levels.

The opinions expressed in this article were as at 1 March 2022 and may change over time.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended Whispir Ltd. The Motley Fool Australia has recommended Whispir 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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