The TechnologyOne Ltd (ASX: TNE) share price could be great value at current levels.
That's the view of analysts at Goldman Sachs, which have just spoken very positively about the ASX 200 enterprise technology stock.
What is Goldman Sachs saying about this ASX 200 tech stock?
According to a note from this morning, the broker has upgraded the company's shares to a buy rating with an $18.30 price target.
Based on the current TechnologyOne share price of $15.32, this implies a potential upside of 19.5% for investors over the next 12 months.
Goldman is also expecting a modest ~1.5% dividend yield over the next 12 months, stretching the total potential return to approximately 21%.
Why is it bullish?
The broker has been impressed with TechnologyOne's performance over the last two years as it successfully shifted its focus to a cloud subscription revenue model. It said:
Over the last two years TNE has demonstrated an improvement in the rate of underlying growth at the same time as it shifts legacy on-premise customers to cloud, creating a dual tailwind to ARR growth that has continued to surprise to the upside.
The good news is that the broker believes this positive trend can continue. Particularly given its defensive earnings. It adds:
We highlight the defensiveness of TNE's core end markets of Local Government (35% of 1H23 ARR) and Education (25%), and the public sector more broadly (>75%), with growing IT spending supported by revenue streams including council rates and government funding.
We see TNE's +10-15% FY23E PBT growth guidance as conservative, and believe that TNE can grow PBT >15% p.a. across FY23-25E driven by its strong ARR outlook (+18% FY22-25E CAGR) and modest margin expansion (+220bps FY22-25E).
In light of the above, Goldman sees TechnologyOne as an ASX 200 tech stock to buy right now.
