Guess which ASX tech stock is Goldman Sachs' top pick in March

This stock is the crème de la crème according to the broker

| More on:
A woman sits in a cafe wearing a polka dotted shirt and holding a latte in one hand while reading something on a laptop that is sitting on the table in front of her

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A new month is here, so what better time to make some new additions to your portfolio.

But which ASX stocks could be top options in March? Well, one that has been named as a buy on Friday is tech stock Xero Ltd (ASX: XRO).

In fact, the broker has named the company as its "preferred ANZ Technology pick" this morning.

What is Goldman Sachs saying about this ASX tech stock?

Goldman was pleased with Xero's inaugural investor day event and came away feeling even more positive on the company.

It has highlighted three key takeaways from the event:

(1) Xero is increasingly positive on its financial outlook, upgrading its use of the Rule of 40 from a 'useful measure' to having a formal aspiration to deliver rule of 40 or greater, alongside aspiring to double revenues; (2) The cadence of product releases (both announced and planned) has dramatically accelerated within the 3X3 over the last year (highlights include increase US bank feeds from ~20 to 600 in 12m, alongside launching US bill pay partnership and Just Ask Xero, the GenAI product announced today) – this supports further subscriber and ARPU growth for XRO; and (3) The strength and calibre of Xero's global management team, which has undergone a significant change over the past year.

Buy rating reiterated

In response to the event, the broker has reiterated its buy rating with an improved price target of $152.00 (from $141.00).

Based on the latest Xero share price of $127.31, this implies potential upside of greater than 19% for the ASX tech stock over the next 12 months. Goldman concludes:

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$100bn 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.

Motley Fool contributor James Mickleboro has positions in Xero. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and Xero. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Technology Shares

Data Centre Technology
Technology Shares

Own NextDC shares? Here's why the company is spruiking nuclear power

NextDC announced a $1.32 billion capital raising to expand its data centre operations.

Read more »

A woman jumps for joy with a rocket drawn on the wall behind her.
Technology Shares

Cettire share price jumps 13% on explosive Q3 sales growth

This online retailer delivered strong revenue growth in the third quarter. But what about its earnings?

Read more »

Five happy friends on their phones.
Technology Shares

Is Life360's soaring share price still 20% undervalued?

Here's what one leading broker is saying about this hot stock.

Read more »

A male investor sits at his desk looking at his laptop screen holding his hand to his chin pondering whether to buy Macquarie shares
Technology Shares

One ASX share to buy right now after the US market pullback

With US markets retracing overnight, I think this ASX share is one to buy right now.

Read more »

A young man talks tech on his phone while looking at a laptop. A financial graph is superimposed across the image.
Technology Shares

Up 16% in 2024! Are ASX tech shares now overvalued?

Could it be time to cash in on recent big winners in the share market?

Read more »

A group of men in the office celebrate after winning big.
Technology Shares

2 ASX betting shares making big news this week

What's going on in the Australian betting industry this week?

Read more »

Two IT professionals walk along a wall of mainframes in a data centre discussing various things
Technology Shares

What's happening with the NextDC share price following today's $1.3 billion announcement?

ASX 200 investors are weighing the ramifications of NextDC’s $1.3 billion announcement.

Read more »

A young man sits at his desk with a laptop and documents with a gas heater visible behind him as though he is considering the information in front of him. about the BHP share price
Technology Shares

ASX 200 tech stock slides despite record $21.2 billion results

The ASX 200 tech stock is coming under selling pressure today.

Read more »