Looking for some exposure to the tech sector? Then read on!
That's because two high-quality ASX 200 tech stocks have recently been tipped as buys by top brokers.
Here's what they are saying about these rapidly growing companies:
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Life360 Inc (ASX: 360)
This location technology company's shares are trading within touching distance of a record high.
Investors have been scrambling to buy the Life360 app owner's shares after its sales growth went into overdrive. This has been underpinned by the company's enormous global monthly active users (MAU). They increased by 4.9 million during the first quarter to 66.4 million.
This growth impressed analysts at Bell Potter. In response, the broker retained its buy rating and boosted its price target to $17.75. This implies potential upside of 15% over the next 12 months. The broker commented:
We have increased the multiple we apply in the EV/Revenue valuation from 5.5x to 6.5x given the proposed US listing and potential re-rating of the stock given the higher multiples of comps like Reddit (NYSE: RDDT). There is, however, no change in the 9.3% WACC we apply in the DCF. The net result is a 9% increase in our PT to $17.75 which is >15% premium to the share price so we maintain our BUY recommendation. Key potential catalysts for the stock include another strong quarter of paying circle growth in Q2 (April was another good month), a potential upgrade to the 2024 guidance sometime in H2 and a US listing at some stage in the next 12 months.
Xero Ltd (ASX: XRO)
Another ASX 200 tech stock that is highly rated by brokers is Xero. It is a fast-growing cloud accounting platform provider.
Much like Life360, it has a very large user base. At the last count, the company had 3.95 million subscribers using its core accounting, payroll, workforce management, expenses, and projects solutions.
However, this is only a fraction of its addressable market, which gives Xero a multi-decade runway for growth. It is for this reason that Goldman Sachs currently has a conviction buy rating and $156.00 price target on its shares. It said:
Xero is a Global Cloud Accounting SaaS player, with existing focuses in ANZ, UK, North American and SE Asian markets. We see Xero as very well-placed to take advantage of the digitisation of SMBs globally, driven by compelling efficiency benefits and regulatory tailwinds, with >100mn SMBs worldwide representing a >NZ$100bn TAM. Given the company's pivot to profitable growth and corresponding faster earnings ramp, we see an attractive entry point into a global growth story with Xero our preferred large-cap technology name in ANZ – we are Buy rated (on CL).
