The ASX tech share ripe for picking: Morgans

Technology stocks have been hammered this year, but which ones represent the best bargains at the moment? Here’s one suggestion.

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It’s unfortunate for current shareholders but fantastic for those with cash to buy right now.

Australian technology shares are going for massive discounts at the moment, with the S&P/ASX All Technology Index (ASX: XTX) down more than 21% for the year — and a painful 31.6% since November.

So for bargain hunters, which tech shares are the value picks and which ones are mirages in the desert?

Morgans analyst Andrew Tang had one suggestion to buy at the moment:

‘Favourable operating conditions’ for tech stock

Jobs classifieds site Seek Limited (ASX: SEK) has seen its share price drop 24.5% since November and more than 20% since the start of the year.

But it remains a tech favourite among analysts.

Tang is no exception, saying his team viewed Seek as the best out of the classifieds sites, demonstrating “sustained listings growth”.

“The tailwinds that have driven elevated job ads (~250k currently, +35% on prior comparable period) and updated guidance (FY22 EBITDA updated ~16% at the midpoint to $490 million to $515 million) appear to still remain in place,” he wrote in Morgans Best Ideas for May.

“That is, subdued migration, candidate scarcity and the drive for greater employee flexibility.”

The coming economic conditions are favourable for Seek, according to Tang.

“With businesses looking to grow headcount in the coming months and job mobility at historically high levels according to the RBA, we see these favourable operating conditions driving increased reliance on SEK’s products.”

Others agree, Seek is cheap

Morgans is not alone in its bullishness about Seek.

Only a couple of weeks ago, The Motley Fool reported the Morgan Stanley team had a crush on the tech stock too.

“Its analysts currently have an overweight rating and $36.00 price target on its shares,” wrote my colleague James Mickleboro.

“It expects Seek to benefit from the tight labour market and higher than normal rates of job churn.”

Seek shares closed Monday at $26.93.

CMC Markets shows eight out of 16 analysts rate the stock as a buy, with seven labelling it a “strong buy”.

Back in late March, when they were still much dearer than the current price, FNArena founder Rudi Filapek-Vandyck said Seek shares are “undeservedly cheap”.

“There’s a lot of conviction out there that Seek will do well and has not been treated well.”

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended SEEK Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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