Gentrack Group Ltd (ASX: GTK) shares were under pressure on Tuesday.
The ASX 300 tech stock ended the session almost 5% lower at $9.12 despite the market charging higher.
While this is disappointing, one leading broker believes that it has created a buying opportunity for investors.
What is the broker saying about this ASX 300 tech stock?
According to a note out of Bell Potter, its analysts are expecting a strong full year result from the essential software and services provider to the utilities and airports industry.
Ahead of the release of its results next week, the broker revealed that it expects revenue and earnings ahead of guidance. It said:
We make no changes to our forecasts, with our estimates for revenue of $204m and EBITDA $27m slightly ahead of GTK guidance (c.$200m, $23.5m-$26.5m respectively) but in-line with consensus. Consensus ahead of guidance is likely to be a function of GTK's tendency to beat and upgrade guidance regularly; the last example being the interim result which upgraded to the above from expectations of $170m revenue and an EBITDA range of $20.5m-$25.5m.
Time to buy
In light of this the above and on the belief that its strong growth can continue for the foreseeable future, the broker has reaffirmed its buy rating on the ASX 300 tech stock with an improved price target of $11.50 (from $10.90).
Based on its current share price of $9.12, this implies potential upside of 26% for investors over the next 12 months.
To put that into context, a $5,000 investment would turn into approximately $6,300 between now and this time next year if Bell Potter is on the money with its recommendation.
Commenting on its buy rating, the broker said:
We maintain our Buy recommendation and increase our Target Price to A$11.50/sh on rolling forward our DCF model. We are bullish on GTK's ability to maintain customer win momentum in both ROW and mature markets, supporting high NRR revenues, flow on ARR, but masks 'true' EBITDA margin during growth phases. Customer win momentum is underpinned by rapidly shifting energy consumption and production trends, driving increased complexity within the grids and meeting technical debt within legacy billing platforms.
We recognise the growth and success being implied at these levels and the potential for a de-rating if business momentum falters. However, this is offset by potential for lumpy, large customer win catalysts in FY25.
All in all, this could make Gentrack a good option for investors looking for exposure to the tech sector.
