Top broker recommends buying this beaten down tech stock now

Today might be an inauspicious start for the S&P/ASX All Technology Index but this could present a buying opportunity. Here's one tech stock with a 60% upside.

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Talk about throwing the baby out with the bathwater! The technology sector has been doing it tough as many of these market darlings have been in freefall during this profit reporting season.

This is an inauspicious start for the S&P/ASX All Technology Index (XTX), which the ASX Ltd (ASX: ASX) brand-new mini-NASDAQ index offering.

Perhaps the sell-off is justified given that several have failed to live up to earnings expectations and the big premiums that the sector is trading at.

Tech stocks getting hammered

But there is at least one that's looking oversold and could be poised to make a rebound in the not too distant future.

Before I get into that though, it's worth noting the tech leaders that have fallen out of favour in recent times. This includes the Altium Limited (ASX: ALU) share price and the WiseTech Global Ltd (ASX: WTC) share price after the companies confessed to being impacted by the coronavirus.

The bloodletting continues today with many tech stocks falling harder than the 2.3% plunge in the S&P/ASX 200 (Index:^AXJO) (ASX:XJO)  index during lunch time trade.

Tech bargain buy

But it's usually a good time to be trawling for bargains when things look their bleakest!

One tech stock that might be worth picking up from the sin bin is Nearmap Ltd (ASX: NEA). Sure, it's hard to get bullish about a stock that's collapsed nearly 30% in a month. The Nearmap share price shed another 6.4% this afternoon to a near one-low low of $1.84.

However, Macquarie Group Ltd (ASX: MQG) sees a close to 60% upside for the stock over the next 12 months after the aerial mapping technology company posted a disappointing half year result.

Bad results already flagged

The bad report was largely expected as management issued a profit warning in the weeks leading up to the results.

The group's first half FY20 annualised contract value (ACV) increased 23% over the same period last year and was inline with the downgraded guidance as the churn rate more than doubled to 11.5% from 5.3% in the previous six months. The churn was driven by a small number of large North American subscribers.

How Nearmap can score a re-rate

"The result was largely in line with the recent FY20 trading update that raised some concerns around the stickiness of NEA's subs base, LTV and the broader competitive landscape," said Macquarie.

"Positively, NEA noted the US region had a stronger 2Q20, validating the sales & marketing investment and giving confidence in the scalability of the business."

But Macquarie conceded that management will need to post a much improved second half result in August along with a positive outlook for FY21 if the stock is to hit the broker's price target of $2.90 a share.

No pressure there on Nearmap's chief executive Rob Newman and his team.

Motley Fool contributor Brendon Lau owns shares of Nearmap Ltd. Connect with him on Twitter @brenlau.

The Motley Fool Australia owns shares of and has recommended Nearmap Ltd. The Motley Fool Australia owns shares of Altium and WiseTech Global. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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