ASX tech stocks have been strong performers in 2024.
The good news is that Bell Potter still sees opportunities at this side of the market for investors in 2025.
The broker notes that it has a "positive or constructive view on the outlook for the technology and gaming sector." This is due to "the generally strong or above average forecast revenue and/or earnings growth" and "the easing interest rate environment which is expected to commence in Australia next year."
But given that large cap tech stocks have rallied this year, the broker suspects that the cuts "could have a more positive impact on small to mid cap tech and gaming stocks."
With that in mind, let's look at three mid cap ASX tech stocks that are its best buys for the year ahead:
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Life360 Inc (ASX: 360)
This location technology company's shares are a best buy according to Bell Potter.
It likes the ASX tech stock due to its huge growth opportunity, which is being underpinned by the monetisation of its massive user base. It explains:
The [Life360] app is used globally by over 75 million people and, of these, there are around 7 million paying subscribers. The penetration rate, therefore, is around 10% and the company has a stated long term target of 30% so there is the potential for the paying subscriber base to triple from here. Life360 is also adding new verticals – like advertising, pet and elderly tracking – which provide additional areas of growth. The next potential catalysts are when Life360 releases its Q4/2024 result in February – we expect a strong result towards the upper end of the guidance ranges – and the S&P/ASX index rebalance in March where we see a good chance Life360 will be added to the Top 100.
Bell Potter has a buy rating and $26.75 price target on its shares.
Light & Wonder Inc. (ASX: LNW)
Another ASX tech stock that gets the thumbs up from the broker is gaming technology company Light & Wonder.
Bell Potter believes that recent weakness has created an opportunity for investors to buy into a high quality company. It said:
Light & Wonder is a leading cross-platform games company that develops and manufactures slot machines, creates free-to-play social casino games for mobile platforms, and produces online real-money gaming content for online casinos. […] We anticipate 8-11% annual EBITDA growth rates over CY24-26, driven by further R&D investment that enhances game performance and results in market share gains across the North American premium leased market, global outright game sales markets, and online gaming markets. Additionally, we view the recent turmoil surrounding the Dragon Train preliminary injunction as an attractive entry point.
Bell Potter has a buy rating and $180.00 price target on its shares.
Gentrack Group Ltd (ASX: GTK)
A final ASX tech stock that makes the list is Gentrack. It provides billing, CRM, and utilities software. An example of its software that many readers will have seen is the arrivals/departures board at Sydney Airport.
The broker believes that the company is well-positioned to deliver strong earnings growth in the coming years. It said:
Gentrack develops, provisions, and integrates its billing/CRM platform into energy and water utilities, generating up-front project revenue (from deployments/integrations) that transitions into SaaS-type recurring revenue and embeds GTK within utility tech stacks long-term due to high switching costs. Demand for modern-day utilities billing solutions is growing rapidly due to dual tailwinds in (1) an evolving energy grid generating significant amounts of data and complexity in billing and customer management, and (2) legacy tech debt incurred from historical underinvestment in the utility billing stack.
GTK has a track record of upgrading and beating guidance, with the interim result in May likely to be the next catalyst potentially from lumpy, large contract wins in Southeast Asia. GTK appears expensive at ~90x/~56x FY25e/26e P/E however the valuation reflects high earnings leverage emerging, noting PEG ratios of ~1.2x and ~0.9x respectively.
Bell Potter has a buy rating and $13.90 price target on its shares
