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.
