The tech sector has been a very difficult place to invest this year due to concerns over a potential global recession and rising rates.
For example, the S&P ASX All Technology index is down by approximately one-third in 2022.
While this is disappointing, the team at Goldman Sachs believe there are still some quality tech shares trading at very attractive prices.
Its analysts have been screening for tech shares that they believe will continue to prosper in the current environment and have picked out their favourite.
Given concerns around a global recession and the continued de-rating of the ANZ tech sector, we screen for Australia Technology names (ANZ software companies >$250mn market cap) that look well-placed to navigate a more challenging macro environment based on FCF margins, b/s strength and recurring revenue.
The tech share that came out on top was enterprise software provider TechnologyOne Ltd (ASX: TNE).
What did the broker say?
Goldman likes TechnologyOne due to its defensive qualities, high recurring revenue, and strong long term growth potential.
Defensive end markets (public sector and education) with IT spending that are relatively resilient to recessions (see our initiation here). Contractual CPI pricing pass-through, high recurring revenue, minimal churn (<1%), high margins and net cash are attractive attributes in a slowing economy. In addition, TNE’s recent result highlight continued momentum towards the +A$500mn FY26 ARR target, providing valuable earnings growth visibility over coming years, in our view.
According to the note, the broker has a buy rating and $13.30 price target on the tech company’s shares
Based on the current TechnologyOne share price of $10.20, this implies potential upside of 30% for investors over the next 12 months.