3 ASX tech shares that could pop when the mood turns

Consider buying this trio of tech shares that have massive potential but are out of favour with the market… for now.

| More on:
a man and a woman sitting in a technology related work environment high five each other while the man wears headphones around his heck and the woman sits in front of a laptop.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The year 2022 has been brutal on ASX technology shares.

The S&P/ASX All Technology Index (ASX: XTX) has declined by around 35% so far this year, and there is no relief in sight.

But long-term investors will already know the tide will turn sooner or later.

Shaw and Partners portfolio manager James Gerrish said that the ride will be bumpy at least for the rest of 2022.

“It’s going to [be] a volatile and unforgiving year for stocks that are not making money and trading on very high multiples of revenue that have any type of slip-up.”

So for now, his team is just sticking to ASX tech shares names that are profitable.

‘Highest risk and greatest potential reward’

But of course, with risk comes reward.

Gerrish admits that once the sentiment turns back in favour of high-growth stocks, some pre-profit tech companies may have far more upside.

“If sentiment changes in the space, that is where the highest risk and greatest potential reward will be found.”

Out of those, he named three ASX tech shares in particular that are best placed for a return to glory.

“We like Dubber Corp Ltd (ASX: DUB) and see deep value there — however, the share price has been terrible,” he said in a Market Matters Q&A.

“Life360 Inc (ASX: 360) is another worth consideration given its sharp recent declines versus its growth profile, while some value is starting to show in Megaport Ltd (ASX: MP1).”

What do these 3 ASX tech shares do?

Melbourne-headquartered Dubber develops cloud communications software. Its shares have been beaten down by 73% year-to-date.

It’s one that The Motley Fool chief investment officer Scott Phillips picked as the “strike bowler” in his “ASX XI” back in January.

“Takes three-for-none or bowls a brace of wides and goes wicketless,” he said.

“But you wouldn’t be without them, especially in test cricket over a long series.”

Dubber certainly has bowled a few down legside this year. Here’s hoping it can take a five-for soon.

Life360 shares have fared just as worse this year, dropping a painful 69% so far.

Bell Potter loves the family app maker though, setting a price target that’s more than double the ASX tech share’s current price.

“Bell Potter is positive on the company and believes it has ample cash to fund it through to cash flow breakeven,” reported The Motley Fool last week.

“The broker has a buy rating and $7.50 price target on its shares.”

Megaport, despite plunging 67% in value this year, has plenty of fans.

The virtual network provider also has a stock price target that exceeds double the current level, this time with Goldman Sachs.

“The company is tipped to expand rapidly in the future as public cloud adoption and multi-cloud usage increase,” reported The Motley Fool last week.

“Goldman sees networking-as-a-service as a key driver of the company’s growth in the future.”

Motley Fool contributor Tony Yoo has positions in Dubber Corporation, Life360, Inc., and MEGAPORT FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Dubber Corporation, Life360, Inc., and MEGAPORT FPO. The Motley Fool Australia has positions in and has recommended Dubber Corporation. The Motley Fool Australia has recommended MEGAPORT FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Technology Shares

Three colleagues stare at a computer screen with serious looks on their faces.
Dividend Investing

‘Exciting’ ASX 200 dividend share expected to deliver material returns: expert

Investors seeking income stocks need to do more than simply look at what the companies paid out over the past…

Read more »

Two men laughing while bouncing on bouncy balls
Share Gainers

Why is the BrainChip share price bouncing 6% higher today?

What's causing the BrainChip share price to pop on Tuesday?

Read more »

Man pointing at a blue rising share price graph.
Earnings Results

Megaport share price rises as revenue lifts 40%

Investors appeared to react positively to Megaport's results.

Read more »

a man sits at his desk wearing a business shirt and tie and has a hearty laugh at something on his mobile phone.
Technology Shares

Here are 2 excellent ASX tech shares a top broker says are buys

Here are two highly rated ASX tech shares...

Read more »

A cloud with a blue arrow pointing upwards through its middle symbolising a rising asx share price
Share Gainers

Guess which ASX tech share just soared 40% on takeover news

This small-cap ASX tech share has shot up 40% today.

Read more »

A man leaps through the air with a swimming cap and a look of uncertainty.
Share Gainers

Why is the Appen share price jumping 10% on Monday?

What's going on with Appen shares?

Read more »

A frustrated male investor frowns with his hands and arms open asking why the share price has dropped today
Technology Shares

Why is the Novonix share price having such a lousy start to the week?

The Novonix share price is handing back some of its recent gains.

Read more »

a small child carrying a brief case tries to reach an elevator button outside closed elevator doors.
Technology Shares

Why are Betmakers shares attracting increased short interest lately?

Could this be why more short-sellers are snapping up the stock?

Read more »