Down 16%: What on earth is going on with TechnologyOne shares?

The stock rebounded strongly but then started crashing earlier this month. Why has sentiment turned again?

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TechnologyOne Ltd (ASX: TNE) shares have fallen further into the red in Wednesday morning trade.

At the time of writing on Wednesday morning, the shares are down around 0.2% and changing hands for $27.69 a piece.

This morning's share price update reverses some of the losses shed amid a large investor sell off on Tuesday when TechnologyOne ended the day 7% lower.

It's been a rocky ride for the company's share price so far over the past 12 months. The stock peaked at an all-time high in June last year but crashed to a multi year low in February. 

The share price started gaining momentum, climbing 63% higher before changing course again in early June. Over the past 12 months, the share price has fluctuated significantly anywhere between $20.14 and $41.58 a piece.

The shares have now fallen 16% from an 18-month high recorded earlier this month. For the year to date, the share price is roughly 0.6% lower and it's 31% lower than 12 months ago.

A young man talks tech on his phone while looking at a laptop with a financial graph superimposed across the image.

Image source: Getty Images

What has happened to TechnologyOne shares?

There hasn't been any price-sensitive news out of TechnologyOne recently to explain the share price volatility over the past month.

It looks like the sell-off is part of another sector-wide shift away from high-growth technology shares. 

For context, the S&P/ASX 200 Index (ASX: XJO) is down around 1% over the past week but 1% higher over the month. Technology has been the worst-performing sector, however. The tech sector is down 4% lower the past week and around 1% higher over the month.

TechnologyOne shares appear to be one of the worst affected ASX tech stocks. 

Overall, the latest share price reaction reflects broad weakness in the tech sector, and some profit-taking after the company's strong gains over the past 12 months.

Can TechnologyOne shares rebound?

Despite being caught up in the tech-sector wide sell-off over the past nine months, the company has continued to post some positive financial results. 

The SaaS (software as a service) ERP business posted its 17th consecutive first-half profit result in mid-May and reaffirmed FY26 guidance.

I also think that, as a business, TechnologyOne looks like a promising long-term investment. The company provides enterprise software to customers, which include councils, universities, government agencies, and large businesses.

It has a cloud-based software model which generates recurring revenue. It has a sticky subscriber base because, once customers adopt its software, switching is costly and disruptive. I see a long runway for growth as more customers migrate to its platform.

What's better is that it looks like TechnologyOne is one of few tech companies which actually benefits from (AI) product development, rather than challenging it. 

I think TechnologyOne has the potential to outperform over the long term. But what do analysts think?

Are the tech shares a buy, sell, or hold?

Market Index data shows that brokers are very bullish on TechnologyOne shares. They unanimously rate the stock as a strong buy and tip a 17% upside to an average $32.38 target price.

Sentiment is more divided on TradingView data, however. Out of 16 analysts, 12 have a buy or strong buy rating but another two rate the shares as a hold and two rate the stock as a sell.

The average $31.77 target price implies a potential 13% upside over the next 12 months, at the time of writing. But the maximum $34.25 target price implies the shares could climb another 22%.

Motley Fool contributor Samantha Menzies has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Technology One. The Motley Fool Australia has recommended Technology One. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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