2 beaten down ASX tech shares that analysts rate as buys

These beaten down tech shares could be buys…

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It is fair to say that it has been a very disappointing year for the tech sector. But every cloud has a silver lining. On this occasion, that silver lining is the attractive levels that some tech shares have been dragged down to.

For example, the two ASX tech shares listed below have been hammered this year despite continuing their strong growth. Here's why analysts think this could be a buying opportunity for investors:

TechnologyOne Ltd (ASX: TNE)

TechnologyOne is an enterprise software provider servicing the government, financial services, health and community services, education, and utilities and managed services markets. Its shares are down 19% year to date.

This is despite TechnologyOne releasing its half year results last month and reporting a 19% increase in total revenue to $172.5 million and a 23% jump in annual recurring revenue (ARR) to $288.5 million.

Pleasingly, management also reiterated its confidence that it will grow its ARR to $500 million by FY 2026. This is being underpinned by its transition to a software-as-a-service (SaaS) business model and its growing UK business.

The latter more than doubled its profit during the first half and still has a huge runway for growth in a market many times larger than the ANZ market.

Analysts at Goldman Sachs suspect that TechnologyOne could even outperform its ARR target, noting that the risks "are skewed to the upside."

Goldman has a buy rating and $13.30 price target on the company's shares.

Xero Limited (ASX: XRO)

Xero is a cloud-based accounting solution platform provider to small and medium sized businesses globally. Its shares are down 45% since the start of the year.

This is despite Xero recently releasing its FY 2022 results and revealing a 28% jump in annualised monthly recurring revenue (AMRR) to NZ$1.2 billion thanks partly to a 19% increase in total subscribers to 3.3 million.

Furthermore, the company's long term growth prospects remain as positive as ever. For example, Goldman Sachs is forecasting a 26.5% increase in revenue to NZ$1.387.1 billion in FY 2023. After which, it expects Xero's revenue to increase to almost NZ$2 billion by FY 2025.

Beyond that, Goldman has previously stated its belief that Xero has the potential to deliver strong multi-decade growth.

In light of this, it will come as no surprise to learn that its analysts have a buy rating and $118.00 price target on its shares.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Xero. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool Australia has recommended TechnologyOne Limited. 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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