The tech sector took a big hit last week and played a key role in the market's decline.
While this is disappointing if you have exposure to this side of the market, it could be a buying opportunity if you don't.
But which ASX 200 tech stocks should you buy? Let's take a look at three that could be buys:
Image source: Getty Images
Light & Wonder Inc (ASX: LNW)
Analysts at Bell Potter see value in this gaming technology company's shares and have named it as an ASX 200 tech stock to buy.
The broker highlights the company's strong return on invested capital (ROIC) and positive outlook driven by its cross-platform strategy. It said:
LNW operates globally, with over 67% of its revenue historically derived from the US. We anticipate that LNW's cross-platform strategy and leading scale will enhance game performance metrics relative to competitors in both land-based and digital markets. As a result, we expect this improvement in product quality to strengthen LNW's competitive advantage, allowing the company to generate above industry average ROIC.
The broker currently has a buy rating and $186.00 price target on its shares.
Nextdc Ltd (ASX: NXT)
Goldman Sachs thinks that NextDC could be an ASX 200 tech stock to buy.
It believes the data centre operator is well-placed to benefit from rapid growth in cloud adoption. It said:
We are particularly positive on NXT and are Buy rated given the rapid growth in cloud adoption, which has been supported by the continued evolution of the enterprise telecommunications market, and the significant demand by both public and private investors for digital infrastructure assets. We believe the company has a compelling growth profile and a proven and profitable business model, noting it trades on a growth-adjusted discount vs. peers, which we view as unjustified.
Goldman has a buy rating and $18.50 price target on it shares.
Xero Ltd (ASX: XRO)
Another ASX 200 tech stock that could be a buy is fast-growing cloud accounting platform provider, Xero.
Goldman Sachs is also very positive on the company. This is thanks to its enormous global total addressable market (TAM). The broker 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 – the stock is Buy rated.
Goldman currently has a conviction buy rating and $180.00 price target on Xero's shares.
