There has been significant volatility for ASX tech shares in April 2022. But could they be opportunities?
Some technology businesses have the capability of achieving good profit margins because of the intangible nature of their offering.
When combined with revenue growth, tech businesses could deliver good results over the long term.
Here are two ASX tech shares to consider:
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Pushpay Holdings Ltd (ASX: PPH)
Pushpay is a business that predominately serves large and medium US churches in the US. It provides digital donation tools and church management systems.
The company processes billions of dollars of donations each year. It has a total of around 14,000 customers. There is a growing number of customers using multiple products from Pushpay's offering. It recently acquired streaming business Resi Media, expanding the company's offering.
Pushpay describes Resi Media as a high-growth business which has a "strong foothold" in the US faith sector with over 70% of the 'Outreach 100' churches using Resi products.
This ASX tech share is looking to expand in the Catholic sector, eventually reaching a 25% market share, by the number of parishes. According to IBISWorld, in 2016, 27% of US faith giving was generated from Catholic services, totalling US$30 billion. Pushpay says that the Catholic segment represents an estimated annual revenue opportunity of US$330 million.
The benefits from the Catholic segment are expected to be realised "incrementally" over the next financial years.
Pushpay continues to grow its gross profit margin, which increased from 68% to 69% in the first half of FY22. This is up from 54% at March 2018.
TechnologyOne Ltd (ASX: TNE)
This ASX tech share aims to double in size every five years. It provides enterprise software that allows clients to access their software from anywhere.
It says that its 'future' business is expecting to grow by at least 15% per annum, with a particular focus on software as a service (SaaS). The company says that the quality of its SaaS revenue is very high, with a recurring contractual nature, combined with a "very low" churn rate of around 1%. The target is that 95% of revenue is recurring by FY27.
Total annual recurring revenue (ARR) is expected to increase to at least $500 million by FY26. The profit before tax margin was 31% in FY21 and is expected to improve to 35% in the next few years thanks to economies of scale and cost reductions.
TechnologyOne sees a "significant" upside in the UK in the coming years, with the total addressable market in the UK three times the size as the Asia Pacific region.
The ASX tech share says that SaaS is creating significant opportunities, with a "strong" pipeline for 2022.
It's currently rated as a buy by the broker Morgans, with a price target of $13.73.
