2 strong ASX tech shares that might be good buys

Xero is one of the ASX tech shares that could be a good opportunity.

| 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

ASX tech shares could be the right place to look for strong opportunities with good growth potential.

Technology companies typically have higher gross profit margins than 'normal' businesses because of the offering, which is often intangible. It's very easy to transmit a digital service than ship a physical couch.

These two ASX tech shares could be long-term opportunities:

Xero Limited (ASX: XRO)

Xero has become one of the world's largest accounting software companies.

It has a very strong market position with small and medium businesses in Australia and New Zealand, with 1.1 million and 446,000 subscribers respectively.

But it's also growing at a very solid pace in other areas around the world. For example, in the UK it had 720,000 subscribers at the end of FY21. In North American it had 285,000 subscribers and in the 'rest of the world' it had 175,000 subscribers.

Xero has a very high gross profit margin. In FY21 it had risen to 86%, up from 85.2% in FY20.

Its subscriber value and revenue numbers continue to grow each year. In FY21, it saw 18% revenue growth to NZ$848.8 million. The annualised monthly recurring revenue (AMRR) rose 17% to NZ$963.6 million. The total lifetime value of subscribers increased 38% to NZ$7.65 billion.

In FY21, the ASX tech share generated free cashflow of NZ$56.9 million despite all of the investing it's doing.

Xero says that it will continue to focus on growing its global small business platform and maintain a preference for reinvesting cash generated to drive long-term shareholder value.

Betashares Nasdaq 100 ETF (ASX: NDQ)

This exchange-traded fund (ETF) is a portfolio of 100 of the largest non-financial businesses on the NASDAQ, which is a stock exchange in the US.

It happens to be the home of many of the world's biggest tech companies, which means it owns a number of strong global tech companies with very resilient economic moats.

Betashares Nasdaq 100 ETF has holdings like Microsoft, Apple, Alphabet (Google), Facebook, Amazon. It would be a hard job for any business to try to disrupt these juggernauts.

Microsoft has a suite of strong offerings for clients and consumers like its Office tools, Outlook email, LinkedIn and Xbox. Apple has a big market share of smartphone hardware and services, whilst Alphabet is in the smartphone world, online video, search and so on.

The Betashares Nasdaq 100 ETF also has numerous other businesses in the portfolio that are among the global leaders at what they do. Businesses like PayPal, Netflix, Adobe, PepsiCo, Costco, Moderna and Intuit are just a few of the other names in the portfolio.

As a group of businesses, this ETF owns many competitively advantages businesses. This has shown up in the net returns of the ASX tech share, with an average return per annum of 27.2% over the last five years. But past performance is no guarantee of future performance.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended BETANASDAQ ETF UNITS and Xero. The Motley Fool Australia owns shares of and has recommended BETANASDAQ ETF UNITS and Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Technology Shares

Man pointing at a blue rising share price graph.
Technology Shares

Up 30% in a month, this ASX 200 tech share is 'a compelling opportunity': expert

Analysts from listed investment company WAM Capital say this ASX 200 tech stock is worth watching.

Read more »

A young man goes over his finances and investment portfolio at home.
Technology Shares

How much upside does Macquarie tip for Light & Wonder shares after its result?

Let's see what the broker is saying about this tech stock.

Read more »

Business people discussing project on digital tablet.
Technology Shares

Guess which ASX 200 stock is down 4% following Q3 update

Let's see what is causing investors to hit the sell button today.

Read more »

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

Guess which ASX 200 tech stock is crashing 14% on results day

This tech stock is having a rough time today. But why?

Read more »

Data Centre Technology
Technology Shares

Is it too late to buy NextDC shares?

NextDC's share price has surged over the last couple of weeks. Will it continue?

Read more »

Man with a hand on his head looks at a red stock market chart showing a falling share price.
Technology Shares

Guess which ASX 200 tech stock is crashing 25% following an update

This tech stock is being sold off on Wednesday. But why?

Read more »

A young man goes over his finances and investment portfolio at home.
Technology Shares

Why are WiseTech shares sinking 6% today?

What's going on? Let's find out what is happening with this tech stock today.

Read more »

Two IT professionals walk along a wall of mainframes in a data centre discussing various things
AI Stocks

NextDC share price lifts off on record quarterly contract wins

AI-fuelled data centre demand is lifting investor interest in the ASX 200 tech stock today.

Read more »