The TechnologyOne Ltd (ASX: TNE) share price was out of form on Monday and dropped into the red.
This means the enterprise software company's shares are now down 15% since the start of the year.
Is the TechnologyOne share price weakness a buying opportunity?
One leading broker that sees the recent weakness in the TechnologyOne share price as a buying opportunity is Bell Potter.
According to a note this morning, the broker has retained its buy rating but trimmed its price target on the company's shares to $14.00.
Based on the current TechnologyOne share price of $11.11, this implies potential upside of 26% for investors over the next 12 months.
What did the broker say?
Bell Potter notes that it has been several months since TechnologyOne advised that it would stop providing new functionality to its on-premise software before ultimately ceasing support in October 2024. This is in an effort to switch customers over to its software-as-a-service (SaaS) solution.
The broker believes the switch could be going well, which bodes well for Technology One's growth.
It commented: "Several months on from this announcement we expect the impact is an acceleration of customer flips from on-premise to SaaS especially given government and local government departments cannot be on unsupported software so need to move."
"We expect this acceleration will be evident in the upcoming 1HFY22 result to be released in late May and will be apparent from a large increase in SaaS ARR. In our view SaaS ARR is now the key metric for Technology One given the transition of the company to SaaS so we would regard a large percentage increase as positive," it added.
And while the broker is not making any changes to its estimates at this stage and continues to "forecast strong SaaS ARR growth of 30% in FY22," it believes there "may be upside risk to this forecast if the SaaS flips are greater than we have allowed for."
