Now could be the time to pounce on the ASX tech stock in this article.
That's the view of analysts at Bell Potter, which have just upgraded its shares.
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Which ASX tech stock?
The stock in question is Catapult Group International Ltd (ASX: CAT).
It is a sports technology company that is "operating at the intersection of sports science and analytics."
Its products are designed to help athletes optimise performance, avoid injury, and improve return to play. At the last count, it was working with more than 4,200 elite teams in over 40 sports across more than 100 countries globally.
Bell Potter notes that the tech stock is due to release its half year results next month. It appears confident that Catapult will reveal another strong period. Particularly given the Tactics & Coaching (T&C) business, which the broker believes has huge potential. It said:
Key focus for us in the upcoming result is the performance of Tactics & Coaching (i.e. the video business) from both a revenue and TCV perspective. This business has had much lower growth than the core Performance & Health (i.e. the wearables business) over the last two years but this could change following the release of new products including the new sideline video solution for American football.
This solution is currently being used by teams in the Southeastern Conference (SEC) of the National Collegiate Athletics Association (NCAA) while most of the other conferences are using a solution provided by DVSport. Notably the NFL currently does not allow teams to use sideline video but this could change if it is successful and becomes widespread at a college level. A key advantage of Catapult is it already dominates the video market in American football for editing and publishing with its Thunder product and in in our view there is also the potential for Catapult to dominate the market at both the NFL and NCAA for sideline video over the medium term.
Time to buy
This morning, Bell Potter has upgraded the ASX tech stock to a buy rating with an improved price target of $2.75 (from $2.35).
Based on its current share price of $2.43, this implies potential upside of 13% for investors over the next 12 months. It concludes:
On the back of the potential for T&C to exhibit stronger growth in the upcoming result and over the next few years, we have increased the multiple we apply in the EV/Revenue valuation from 3.5x to 4.25x. We have also lowered the WACC we apply in the DCF from 9.1% to 8.6% which has been driven by both a reduction in the beta and risk free rate. The net result is a 17% increase in our PT to $2.75 which is a 13% premium to the share price and we upgrade our recommendation to BUY.
