Guess which buy-rated ASX 200 tech stock is targeting huge growth through to 2030

This software company has big and bold growth plans.

| More on:
Cybersecurity professional man inspects server room and works on ipad

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

TechnologyOne Ltd (ASX: TNE) shares are slide into the red on Tuesday morning.

At the time of writing, the ASX 200 tech stock is down 1% to $19.40.

Why is this ASX 200 tech stock falling?

A broad market selloff this morning is offsetting the release of a presentation from the high-flying enterprise software provider ahead of its investor day event.

Not even the announcement of management's long term annual recurring revenue (ARR) target has been able to keep its shares afloat.

What did it announce?

Firstly, the company highlights that it now expects to achieve its $500 million ARR target in the first half of FY 2025 instead of FY 2026.

But looking beyond this, management believes it can grow its ARR to $1 billion by 2030. That's more than double its current ARR of $423.6 million.

Supporting this will be its strong net revenue retention (NRR) target of 115% to 120% and its large (and growing) opportunity in the Asia-Pacific (APAC) region. The company notes that it sees "$2b of ARR whitespace in our APAC customer base. R&D over next 5 years doubles APAC ARR whitespace from $2b to $4b."

It is also calling its Solution as a Service (SaaS+) a gamechanger. It notes that SaaS+ is a long-term strategic growth pillar and a complete flip to the consulting model. The ASX 200 tech stock expects this to expand its total addressable market (TAM) to $13.5 billion by 2030.

However, management points out that the SaaS+ model requires patience. This is because its implementation expense is incurred up front and then revenue is earned over four years. This means that in year two and beyond, 40% ARR uplift will fall directly to the bottom line, boosting margins.

Should you buy?

One analyst that is likely to be pleased with today's update is Dylan Evans from Catapult Wealth.

He continues to believe that this ASX 200 tech stock will outperform the market thanks to its successful transition to an attractive software as a service subscription model and has named it as a buy.

Commenting on The Bull, Evans said:

BUY – Technology One (TNE) TNE has successfully transitioned to a software as a service subscription model. This is an attractive model for securing and increasing revenue. Growth has continued to surprise on the upside this calendar year, with TNE reporting total annual recurring revenue growth of 21 per cent at its half year result in May. The stock has been included in the S&P/ASX 100 index. The share price has performed well in 2024. We believe the stock will continue to outperform.

Motley Fool contributor James Mickleboro has positions in Technology One. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Technology One. The Motley Fool Australia has recommended Technology One. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Technology Shares

Robot humanoid using artificial intelligence on a laptop.
Technology Shares

The best ASX AI stock to invest $500 in right now

The team at Morgans thinks this is one of the best ways to invest in AI on the ASX.

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Technology Shares

This ASX All Ords stock just crashed 25%! Here's why

Let's find out what is making investors rush to the exits on Thursday.

Read more »

Businessman working and using Digital Tablet new business project finance investment at coffee cafe.
Technology Shares

What's going on with Xero shares today?

The tech stock has made an announcement this morning relating to its CEO.

Read more »

Three analysts look at tech options on a wall screen
Technology Shares

Why did this small-cap ASX tech stock just explode 39%?

Investors are piling into the ASX tech stock on Wednesday. But why?

Read more »

A woman wearing yellow smiles and drinks coffee while on laptop.
Technology Shares

Investors should put these 2 top ASX tech shares on the watchlist

These tech companies have enormous potential, in my view.

Read more »

A man sits in a chair hunched over a laptop and covered head to toe in frozen icicles to represent Envirosuite's trading halt
Small Cap Shares

ASX small-cap stock halted amid global semiconductor deal

Investors are awaiting details of a capital raise.

Read more »

Man smiling at a laptop because of a rising share price.
Technology Shares

Up 64% in a year, why WiseTech shares are still a buy

Could WiseTech shares deliver another year of benchmark smashing returns in 2025?

Read more »

A man holds his head as he looks at his laptop and contemplates more bills to pay.
Technology Shares

Guess which ASX 200 tech stock just crashed 13% on news from Microsoft?

The tech giant has dealt this company a blow. Let's see what is happening.

Read more »