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.
Image source: Getty Images
'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."
