The ASX 200 tech share to pounce on as soon as it has a dip: expert

Technology stocks have struggled mightily in 2022. But here's one star shining so bright that you need to watch for a low entry point.

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Regular readers of The Motley Fool would be well aware of how badly technology shares have fared this year.

So it might surprise you to find that there is one tech stock that's going so well that one expert is urging investors to wait until there's a dip to buy in.

Yet that's exactly what Morgans senior analyst Nick Harris is saying about Brisbane's TechnologyOne Ltd (ASX: TNE):

Recurring revenue target about to hit 12 months early

Harris wrote on the Morgans blog that TechnologyOne's full-year report this week was "another high quality result".

"Assuming trends remain, [the result] positions TechnologyOne to hit $500 million annual recurring revenue 12 months ahead of their stated FY26 target."

The market agreed with Harris, sending the TechOne share price 5% up in just a few minutes on Tuesday morning.

Pleasingly, customer churn also halved, representing a 99% retention rate. Revenue grew 18% on a year-on-year basis.

"In our view, revenue growth (including contractual CPI escalators) combined with lower churn and higher net revenue retention shows the strength of TechnologyOne's value proposition," said Harris.

"It offers great value which makes for happy and sticky customers. This in turn builds a strong competitive position and over time large barriers to entry for TechnologyOne."

'One of the highest quality stocks on the ASX'

So the business is excellent quality and is rocketing in the right direction.

The only trouble for potential buyers is the share price.

In a year in which most tech stocks have struggled, TechOne is now in the green, trading at 0.6% higher than where it started 2022.

In fact, the stock has risen 24% since the end of September.

Harris, therefore, recommends keeping an eye on it and pouncing when there's a dip.

"TechnologyOne is one of the highest quality stocks on the ASX and we continue to rate the outlook," he said.

"We would see any weakness as a buying opportunity."

Harris' peers also seem to be taking a wait-and-watch approach. According to CMC Markets, seven out of nine analysts are currently rating TechOne as a hold, while the other two are saying strong buy.

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended TechnologyOne Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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