Investors that are wanting to add or increase their exposure to the tech sector might want to check out the two ASX 200 stocks listed below.
That's because brokers have just slapped buy ratings on them. Here's what they are saying about these ASX 200 tech stocks:
Hub24 Ltd (ASX: HUB)
According to a note out of Bell Potter, its analysts have initiated coverage on this investment platform provider's shares with a buy rating and $53.20 price target. Based on its current share price of $46.07, this implies potential upside of 15.5% for investors over the next 12 months.
Bell Potter likes the company due to its positive long-term outlook, which is being supported by several tailwinds. It explains:
Our favourable investment view is supported by: (1) changes in advice, with investment professionals shifting away from institutionally owned platforms while seeking comprehensive technology solutions; (2) single digit market share and leading capital flows; and (3) increases to the super guarantee contribution and rollovers into self-managed super funds.
In addition, the broker highlights the material discount that the ASX 200 tech stock trades at compared to rival Netwealth Group Ltd (ASX: NWL). It feels this is unwarranted, especially given its superior technology. Bell Potter adds:
Netwealth is trading on a blended 1 year forward EV/EBITDA of 32.9x with lower forecast FUA and mature EBIT margins. We don't believe HUB's trading discount of ~26% is justified and see the potential for it to rerate, predicated on superior technology, recurring revenue growth and operating leverage.
Xero Ltd (ASX: XRO)
Another ASX 200 tech stock that has been rated as a buy this morning is cloud accounting platform provider Xero. Goldman Sachs has reiterated its conviction buy rating with an improved price target of $180.00. Based on its current share price of $134.70, this suggests that 34% upside is possible over the next 12 months.
Goldman has become even more bullish on the company after reassessing its UK opportunity. It said:
Following our June UK trip, attending Xerocon and meeting with accountants/competitors/experts, we are encouraged with the positive feedback (vs. our 2022 trip), in particular around its refreshed strategy and increased focus. [We] increase our 12m TP +10% to A$180 (36X EBITDA, from 33X) given increased confidence in the UK, a key growth market for Xero.
This increased confidence comes partly from its view that Xero's product strategy is working. It said:
Product strategy resonating, with good products announced at Xerocon in the right focus areas, and very positive feedback on tap-to-pay and JAX. The more cautious feedback was some updates (i.e. partnerships tax) should have been launched years ago. Xero payroll has also been improving, providing a strong proposition for smaller Xero-only practices. Given we estimate low single digit payroll penetration, there is significant ARPU upside on increased attach.
Overall, analysts appear to believe that these tech stocks could be worth considering for the new financial year.
