The technology sector has been having a prosperous time of late.
For example, over the last 12 months, the S&P ASX All Technology index is up approximately 21%.
This compares extremely favourably to a gain of almost 1% by the benchmark ASX 200 index over the same period.
But if you thought all the gains were gone now, think again.
That's because Goldman Sachs is tipping the following ASX tech shares as buys with considerable upside potential. Here's what the broker is saying:
Macquarie Technology Group Ltd (ASX: MAQ)
The first ASX tech share that could be a buy according to Goldman Sachs is Macquarie Technology.
It is a leading cloud, data centre, cyber security, and telecommunications company with a focus on the corporate and government sectors.
According to a recent note, the broker has a buy rating and $82.10 price target on its shares. This implies potential upside of 18% for investors over the next 12 months. It commented:
Data centre demand has reached an inflection point, both in the near-term (cloud) and long-term (AI), in our view driving an improvement in MAQ's growth, earnings mix and ultimately valuation multiple over time. Backed by management's track record of execution, and trading at a discount to other DC and Cloud Services peers, we maintain Buy.
Xero Limited (ASX: XRO)
Another ASX tech share that could generate big returns according to the broker is Xero.
It is a leading cloud accounting platform provider to small and medium-sized businesses (SMBs) globally.
Goldman has a buy rating and $141.00 price target on its shares, which suggests potential upside of 30% for investors from current levels. It commented:
We see Xero as very well-placed to take advantage of the digitisation of SMBs globally, driven by compelling efficiency benefits and regulatory tailwinds, with >100mn SMBs worldwide representing a >NZ$76bn TAM. Given the company's pivot to profitable growth and corresponding faster earnings ramp, we see an attractive entry point into a global growth story with Xero our preferred large-cap technology name in ANZ – we are Buy rated.
