The Australian tech sector may not be the largest, but that doesn't mean there aren't any quality ASX shares to buy from this side of the market.
For example, two ASX tech shares that are highly rated and have recently been tipped as buys are named below. Here's why they could be top options for a $10,000 investment next week:
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Life360 Inc (ASX: 360)
Analysts at Bell Potter think that this ASX tech share could be a quality option for investors.
Life360 operates in the digital consumer subscription services market with a focus on products and services for digitally native families. Its key product is the Life360 app, which currently has 71 million active users. It offers families features such as communications, driver safety, and location sharing. It also recently launched an advertising business which is aiming to monetise its massive userbase.
Bell Potter was very impressed with the company's performance during the second quarter and is feeling confident ahead of the seasonally stronger third and fourth quarters. It said:
On the back of the strong result and guidance upgrade we have increased the multiple we apply in the EV/Revenue valuation from 6.0x to 6.25x and reduced the WACC we apply in the DCF from 9.3% to 9.1%. This combined with the changes in our forecasts has resulted in an 8% increase in our PT to $20.50 […] Potential catalysts include the Q3 result in November – typically the strongest quarter for paying circle growth – and a step up in advertising revenue in both Q3 and Q4. Increased clarity around the new Placer.ai deal could also be a positive as well as early success for Hubble.
The broker has a buy rating and $20.50 price target on its shares.
Xero Ltd (ASX: XRO)
Another ASX tech share that is highly rated is Xero. It is a cloud accounting platform provider to small businesses across the globe. This is a huge market, with management estimating that its addressable market totals 100 million. Given that its current subscriber base stands at 4.2 million, this gives Xero a huge growth runway.
It is for this reason that Goldman Sachs rates Xero so highly. It commented:
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 – the stock is Buy rated.
Goldman has a buy rating and $180.00 price target on its shares.
