The TechnologyOne Ltd (ASX: TNE) share price is recovering strongly on Tuesday.
At the time of writing, this top ASX 200 tech stock is up almost 5% to $25.77.
That's a strong rebound — and it might have something to do with a bullish note out of Bell Potter this morning.
Bell Potter turns bullish
This morning, the team at Bell Potter upgraded TechnologyOne shares to a buy rating. And while they have trimmed their price target by 5% to $29.00 due to the recent market selloff and growing fears of a global trade war, they still see a 13% return on offer from current levels.
That potential return — paired with a defensive, high-quality earnings profile — was enough for the broker to pull the trigger.
Growth is still the story
According to the note, Bell Potter hasn't changed its core forecasts for TechnologyOne.
It continues to expect profit before tax (PBT) growth of 19% per annum through FY25 to FY27, supported by low-teens revenue growth and steady margin expansion. Impressively, that would be a slight step-up from the PBT growth the company achieved over the last three years (15%, 16% and 18%).
This is thanks to its successful transition to a software-as-a-service (SaaS) model, which now delivers highly recurring, defensive revenues. With a strong net cash position (forecast to exceed $300 million by the end of FY 2025 even after the acquisition of CourseLoop), the company also has firepower for future acquisitions or capital returns.
Commenting on the ASX 200 tech stock, the broker said:
We have lowered the multiples we apply in the PE ratio and EV/EBITDA valuations from 65x and 35x to 60x and 32.5x due to the recent market sell-off and risk of a global trade war. We note, however, that Technology One is not impacted by tariffs and its revenues are defensive and highly recurring.
What's next?
According to the broker, the ASX 200 tech stock's half year result — expected next month — could be a major catalyst for the share price.
Bell Potter is forecasting 19% PBT growth for the half, annual Recurring Revenue (ARR) to exceed $500 million, growing around 21%, and FY 2025 guidance of 14%–18% PBT growth, which would be an uplift on FY 2024's range.
Importantly, Bell Potter highlights that TechnologyOne has a track record of beating its guidance — in FY 2024, it delivered 18% growth against a forecast range of 12% to 16%. It explains:
We note that VA consensus for PBT growth in FY25 is already c.19% – consistent with our forecast – and the guidance we suggest of 14-18% is still below this level. But Technology One does have a history of beating its guidance – the growth last year, for instance, was 18% versus guidance of 12-16% – so we believe guidance of 14-18% growth for FY25 would actually support both our forecast and consensus.
All in all, it sees now as an opportune time to load up on this quality stock.
