Wilson Asset Management equity analyst Sam Koch has revealed one tech stock that's a good buy at the moment.
Technology companies have gone gangbusters this year, so most are inflated in value. But Koch reckons Tyro Payments Ltd (ASX: TYR) still has legs.
Wilson sold out of Tyro in February, and the share price was subsequently hammered during the COVID-19 downturn.
"What the market is missing, however, is the structural shift towards card payments away from cash, which will drive Tyro's earnings growth," Koch told an investor call.
"Currently trading at a 40% discount to international peers, we believe this evaluation gap will close as we emerge from lockdown and more people use card over cash."
Wilson currently has a price target of $4.30 to $4.50 for Tyro, which closed at $3.30 on Thursday.
Tech shares to stay away from
Wilson Asset Management lead portfolio manager Oscar Oberg said its flagship fund WAM Capital Limited (ASX: WAM) had sold out of the tech industry this year, going from 10% of its portfolio down to about 6%.
WAM Capital had done pretty well out of stocks like Appen Ltd (ASX: APX), but it sold the company this year because "expectations were just sky-high".
According to Oberg, it and Afterpay Ltd (ASX: APT) are typical of the current hype around technology.
"You can't just look at companies like Afterpay, which went from $8 to $90, and think that's the new normal," said Oberg.
The Appen share price was up 3.21% to close the day at $32.51 on Thursday.
When asked about Kiwi software maker Xero Limited (ASX: XRO), Oberg said he would stay away.
"Xero is an exceptional global growth story," he said.
"At this stage we believe Xero is probably fair to overpriced… Unfortunately at the [current] valuation, not attractive."
Xero's share price is up about 17% from the start of the year, even after a correction the last 8 days.
