There are a lot of options for investors in the tech sector.
And while Xero Ltd (ASX: XRO) and WiseTech Global Ltd (ASX: WTC) may take the headlines, there are smaller ASX tech stocks that are growing at rapid rates.
One of those is Black Pearl Group Ltd (ASX: BPG).
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What is this ASX tech stock?
Black Pearl Group is a data technology platform that develops and operates a lead prospecting and marketing product suite.
It released its FY 2026 results this week and revealed annualised recurring revenue (ARR) growth of 114% to $26.8 million.
Bell Potter notes that this underpinned recognised revenue of $13.7 million, which is a 77% increase year on year. And with the ASX tech stock's gross margin improving 83 basis points to 68.6%, its gross profit grew 79% to $9.4 million.
The broker was pleased with Black Pearl Group's growth. However, it concedes that this is coming at the expense of cash flow generation. It said:
Underpinning ongoing ARR growth is the underlying scaling of Pearl Engine, which is presently ingesting 31b data points daily (+47.6% since Sep '25), and according to commissioned research drives a 25x increase of high-quality leads versus a leading frontier agentic model at ~20% of the cost-per-lead (0.71c vs. 3.41c). Further detail in a full report is expected to be communicated to the market in the near-term. BPG also implemented a venture cost-led model post-balance date aimed at tying opex to revenue outcomes more closely to manage group cash and identified $1.8m in cost synergies following the first six months of B2BRocket integration.
We have increased our opex intensity in growing ARR, but we have also increased our ARR forecasts and closed the gap to revenue conversion given some present DaaS pipeline negotiations remove contract ramping which should be broadly supportive for cash flows. Net changes to EBITDA are an increase in losses of -$4.5m, -$4.1m, -$1.0m through FY27-29e.
Should you buy this ASX tech stock?
According to the note, in response to its results, Bell Potter has retained its speculative buy rating on Black Pearl Group's shares with a reduced price target of $1.33 (from $1.82).
Based on its current share price of 52.5 cents, this implies potential upside of approximately 150% for investors over the next 12 months.
Commenting on its investment thesis, Bell Potter said:
We retain our Speculative Buy rating. Although we have increased our ARR growth forecasts, we reduce our multiples in bull/bear case scenario to account for a rising interest rate environment which is also reflected in an increased WACC of 13.5%. BPG remains ahead of internal ARR expectations and has outlined a greater focus on revenue and cash conversion in FY27 through shortened customer ramping cycles and extracting ongoing operating leverage (+41% ARR per employee YoY).
