The tech sector has been well and truly out of form this year. For example, the S&P ASX All Technology index is down a sizeable 32% in 2022.
While this is disappointing, it could have dragged a number of ASX tech shares down to very attractive levels for a patient long term focused investors.
Two such shares are listed below. Here's why Goldman Sachs rates them highly at present:
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Megaport Ltd (ASX: MP1)
The first ASX tech share that could be in the buy zone according to Goldman Sachs is Megaport.
It is the leading global provider of elastic interconnection services. Megaport's business is hard to get your head around. But essentially, its software layer provides users with an easy way to create and manage network connections. Through the Megaport network, businesses can then deploy private point-to-point connectivity between any of the locations on its global network infrastructure.
Importantly, with the structural shift to the cloud continuing, Megaport appears well-positioned to benefit from increasing demand and higher spending on enterprise networking.
Goldman Sachs certainly expects this to be the case. The broker believes Megaport's "opportunity for further growth is immense [with] GSe A$129bn p.a. spent on fixed enterprise networking across MP1 geographies."
The broker has a buy rating and $10.30 price target on its shares.
Xero Limited (ASX: XRO)
Another ASX tech share that could be a top option for investors according to Goldman Sachs is Xero.
It is a cloud accounting platform provider with ~3.3 million subscribers globally. From these subscribers, the company recently reported annualised monthly recurring revenue (AMRR) of NZ$1.2 billion. This was up 28% year over year.
And while Xero's subscriber numbers appears very large on paper, it is still only a fraction of its addressable market. Management estimates that it has an addressable market of 45 million subscribers, which means it has only captured 7.3% of its market so far.
Goldman Sachs is a big fan of Xero and believes the company is "well-placed to navigate this uncertainty given the stickiness & importance of its software."
The broker has a buy rating and $111.00 price target on Xero's shares.
