The Technology One Ltd (ASX: TNE) share price could be great value ahead of its results release later this month.
That's the view of analysts at Bell Potter, which have just upgraded the ASX 200 tech share to a buy rating from hold.
According to the note, the broker now has a buy rating and improved price target of $17.00 on the enterprise technology provider's shares.
So, with the Technology One share price currently fetching $14.88, this implies potential upside of 14% over the next 12 months.
Why is the broker bullish on this ASX 200 tech share?
The note reveals that Bell Potter is expecting Technology One to release a strong result later this month when it provides its half-year update.
Bell Potter expects the following to be reported:
Total revenue up 14% to $196.6m; PBT up 17% to $49.9m; PBT margin up from 24.7% in 1HFY22 to 25.4% in 1HFY23; and interim dividend up 10% to 4.62c (60% franked).
The broker also highlights that the company's annualised recurring revenue (ARR) will be a key focus. Pleasingly, it is expecting very strong growth in this key metric. It adds:
Key focus for us, however, will be on total ARR which we forecast to grow by 21% to $350m at the end of H1 and such a result will make the $500m+ target by the end of FY26 look very achievable if not conservative.
Why should you invest?
Bell Potter believes this positive medium term outlook makes this an ASX 200 tech share to buy now. Particularly given its belief that management will be forced to upgrade its guidance in due course. It explains:
We also continue to forecast total ARR of $385m, $452m and $535m at the end of FY23, FY24 and FY25. That is, we already forecast Technology One will achieve its $500m+ total ARR target in FY25 and hence why we expect the company to bring forward this target by a year at some stage this calendar year.
