2 excellent ASX tech shares named as buys

These tech shares have large market opportunities to grow into in the future…

| More on:
Monadelphous share price rio tinto A small rocket take off from a laptop, indicating a share price surge

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

If you're searching for growth shares to buy, then the tech sector could be a great place to search. At this side of the market there are a number of companies with the potential to grow significantly over the next decade.

With that in mind, I have picked out two top tech options that are rated highly. Here's what you need to know about them:

Nitro Software Ltd (ASX: NTO)

The first ASX tech share to look at is Nitro Software. It is a software company that is aiming to drive digital transformation in organisations around the world with its Nitro Productivity Suite.

The Nitro Productivity Suite provides integrated PDF productivity and electronic signature tools to customers through a horizontal, software-as-a-service, and desktop-based software solution. Demand has been very strong for the product from businesses of all sizes. This has led to the company's recurring revenue growing at a rapid rate in recent years.

This certainly was the case in FY 2020. For the 12 months ended 31 December, Nitro reported a 64% increase in annualised recurring revenue (ARR) to $27.7 million.

Positively, management appears confident this strong grow will continue in FY 2021. It is guiding to ARR in the range of $39 million to $42 million. This will mean year on year growth of 41% to 51.6%. This is still well short of its total addressable market which is estimated to be $28 billion.

Morgan Stanley is positive on the company. It has an overweight rating and $3.70 price target on the company's shares.

Xero Limited (ASX: XRO)

Another ASX tech share to look at is Xero. It has also been growing at a rapid rate in recent years. This has been driven by the shift to the cloud and its successful evolution from a pure accounting platform provider into a full-service business and accounting solution to small and medium sized businesses globally.

The good news is that Xero is still only scratching at the surface of its overall market opportunity. In FY 2021, the company reported an 18% increase in revenue to NZ$848.8 million, which was driven by a 20% increase in subscribers to 2.74 million. This compares to the cloud accounting subscriber total addressable market of 45 million.

Goldman Sachs is very positive on Xero's future. Thanks to its international expansion, the shift to the cloud, and the monetisation of its app ecosystem, it believes the company could have a multi-decade runway for strong revenue growth.

Goldman has a buy rating and $153.00 price target on its shares.

James Mickleboro does not own any shares mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Xero. The Motley Fool Australia owns shares of and has recommended Xero. The Motley Fool Australia has recommended Nitro Software Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News

A man pulls a shocked expression with mouth wide open as he holds up his laptop.
Broker Notes

Top brokers name 3 ASX shares to buy today

Here's what brokers are recommending as buys this week.

Read more »

Man drawing an upward line on a bar graph symbolising a rising share price.
Share Gainers

Why Mac Copper, Pro Medicus, Web Travel, and Yancoal shares are pushing higher today

These shares are having a good time on hump day. But why?

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why ALS, Fisher & Paykel Healthcare, IPD, and Predictive Discovery shares are falling today

These shares are having a tough time on hump day. But why?

Read more »

Man looking at his grocery receipt, symbolising inflation.
Share Market News

How are ASX 200 investors responding to the latest Aussie inflation numbers?

The ASX 200 was up 0.2% today before the ABS reported the latest inflation figures.

Read more »

A couple makes silly chip moustache faces and take a selfie on their phone.
Broker Notes

Macquarie sees more upside in Telstra shares – What are they worth?

Telstra shares are up 34% over the past year, and Macquarie thinks there's more to come.

Read more »

Smiling man with phone in wheelchair watching stocks and trends on computer
Share Market News

5 things to watch on the ASX 200 on Wednesday

Another good session is expected for Aussie investors today.

Read more »

Silhouettes of nine people climbing a steep mountain to the top at sunset, and helping each other along the way.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a pleasant Tuesday session for ASX investors today.

Read more »

A beautiful ocean vista is shown with a woman whose back is to the camera holding her arms up in triumph as she stands at the top of a rock feeling thrilled that ASX 200 shares are reaching multi-year high prices today
52-Week Highs

8 ASX 200 stocks striking multi-year highs today

These shares hit new price milestones amid a day in the green for the ASX 200.

Read more »