There aren't many ASX shares out there that are strongly endorsed by numerous analysts. But, with the amount of buy recommendations backing these businesses, that implies there could be an opportunity.
It's worth noting that just because multiple brokers like a business, that doesn't guarantee it's going to deliver strong returns.
We're going to look at two S&P/ASX 200 Index (ASX: XJO) shares that are buy-rated by a lot of experts.
Xero Ltd (ASX: XRO)
This business provides cloud accounting software to small and medium businesses, accountants, bookkeepers and financial advisors. It's the leading cloud accounting software provider in New Zealand and Australia.
According to analyst opinions collated by Commsec, there are (at least) 14 buy ratings on Xero shares.
UBS is one of the brokers that likes Xero shares, with a buy rating and a price target of $215.
UBS says that Xero is executing on its strategy, is "macro-resilient", has high profit margins and is growing rapidly. The broker notes that the business is benefiting from price increases, 'making tax digital' in the UK and growth in payments.
The broker also noted that the business has low churn rates despite wider economic disruptions.
The ASX share is delivering a "better balance" between revenue growth and margins while maintaining a high net cash balance. It also thinks Xero is more disciplined with acquisitions these days, so any takeover "will likely be accretive", according to UBS.
UBS forecasts Xero could generate net profit of NZ$322 million in FY26 and NZ$461 million in FY27.
Nextdc Ltd (ASX: NXT)
Another business that is well-liked by analysts is the data centre business Nextdc. According to Commsec, there are currently 15 analyst buy ratings on the business.
Nextdc owns operating data centres, or is working on projects, in cities including Sydney, Melbourne, Brisbane, Perth, Adelaide, Canberra, Darwin, Tokyo, Kuala Lumpur and Auckland.
UBS has a buy rating on Nextdc, with a price target of $20.20.
The broker has been impressed by the company's recent contract wins, including 10MW relating to Kuala Lumpur which "materially de-risks" the project and concerns some investors had about the ability to secure work outside of the home market of Australia.
UBS is expecting strong growth of operating profit (EBITDA) over the next two years.
The broker said that most of the revenue from new contract wins is expected to ramp up during FY27, after completion and commissioning of additional data halls. UBS is projecting the ASX share could generate revenue of $428 million and earnings before interest and tax (EBIT – another measurement of operating profit) of $238 million in FY25. The broker is expecting these financial metrics could grow to $1.06 billion of revenue in FY29 and $238 million of EBIT.
