If you're looking for options in the beaten down tech sector, then you may want to consider the two shares that Bell Potter is recommending.
Here's what the broker is saying about these ASX tech shares:
Life360 Inc (ASX: 360)
Bell Potter sees a lot of value in this rapidly growing location technology company's shares.
And while the broker acknowledges that Life360 isn't yet profitable, it highlights that the company has a strong cash balance which it expects to see it through to breakeven.
In light of this, the significant weakness in the Life360 share price this year could be a buying opportunity for investors.
Bell Potter has a buy rating and $8.23 price target on Life360's shares. It commented:
Life360 develops and delivers a mobile app for families – called Life360 – that provides communications, driving safety and location sharing. The company adopts a freemium model to attract customers but has been successfully converting a portion of these customers to paying subscribers over the last several years by providing valuable features. The company has also recently made two acquisitions – Jiobit and Tile – so that now it not only connects and protects people but also pets and things. Yes Life360 is currently not profitable but is expected to be operating cash flow positive from 4Q2023 and has more than sufficient cash to fund its operations till then.
TechnologyOne Ltd (ASX: TNE)
Another ASX tech share that the broker is bullish on is TechnologyOne. It is a leading enterprise software company serving government, local government, and private sector customers.
It has been growing at a solid rate for years and appears well-placed to continue this trend in the future. This is thanks to its shift to a software as a service (SaaS) business model.
Bell Potter expects this shift to underpin higher margins and strong earnings growth for many years.
It is for this reason that the broker has slapped a buy rating and $14.25 price target on TechnologyOne's shares. It explained:
Technology One is a provider of ERP (enterprise resource planning) software to large corporates and government agencies in Australia, New Zealand, Asia Pacific and the UK. The key competitive advantage of the company is it has developed a fully integrated SaaS solution of its software and is now switching customers to this solution. The migration is now around threequarters complete and Technology One is starting to reap the benefits of greater recurring revenue and a higher margin. This combination will in our view drive double digit earnings growth for years to come and, as the migration of customers approaches 100%, we expect the multiple to rerate to that of a pure SaaS company.
