Catapult Sports Ltd (ASX: CAT) shares could be a top pick in the tech sector.
That's the view of analysts at Bell Potter, who are recommending the ASX tech stock ahead of its results next week.
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What is the broker saying?
Bell Potter believes that Catapult will release a strong update next week and sees potential for stronger than expected earnings. It said:
Catapult will report its FY26 result next Wednesday, 20th May and we expect a result consistent with the trading update provided in late March if not slightly better. The one figure where we see some upside risk is management EBITDA where the guidance is growth of approximately 50% which implies a figure of c.US$22.9m and we forecast US$23.0m whereas consensus appears to be only around US$22.4m.
The other key metrics we expect to be consistent with the guidance of ACV b/w US133-134m (vs BPe US$133.6m), free cash flow excluding transaction costs b/w US$5-6m (vs BPe US$5.6m) and Rule of 40 >33% (vs BPe 44%/34% including/excluding IMPECT on a constant currency basis).
Bell Potter notes that the tech stock has provided the same guidance for two years running. The broker believes it will be more of the same with this update. It adds:
Catapult has provided the same guidance the last two years: ACV growth to remain strong with low churn; continued improvement in cost margins towards targets; and higher free cash flow as the business scales. We expect the same guidance to be provided again for FY27 and our forecasts are already generally consistent with that: ACV growth of 15% to US$153m and management EBITDA margin to increase from 16.7% in FY26 to 20.4% in FY27.
ASX tech stock tipped to rise
According to the note, the broker has retained its buy rating on the ASX tech stock with a trimmed price target of $4.50 (from $4.75).
Based on its current share price of $3.10, this implies potential upside of 45% for investors over the next 12 months.
Commenting on its buy recommendation, Bell Potter said:
We have lowered the multiple we apply in the EV/EBITDA valuation from 27.5x to 25x and increased the WACC we apply in the DCF from 8.6% to 8.8% due to the continued weakness in the tech sector.
Catapult remains our key pick in the tech sector amongst mid cap stocks outside the S&P/ASX 100 index. We see little risk of AI disruption for the stock given its extensive proprietary data, multiple product platform and the hardware component to its solutions.
