Are you a fan of growth stocks like I am? If you are, then it could be worth looking at the two ASX growth shares listed below.
They have been named as buys by brokers and tipped to rise strongly from current levels. Here's what analysts are saying about them:
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Nextdc Ltd (ASX: NXT)
Morgans thinks that NextDC could be an ASX growth share to buy for big returns.
It is a leading provider of innovative data centre outsourcing solutions, connectivity services, and infrastructure management software.
NextDC has been growing at a strong rate for many years and the broker believes this will continue for some time to come. This is thanks to the significant and ongoing structural demand for data centre capacity, which is being underpinned by the artificial intelligence megatrend. The broker said:
Enjoying all the benefits of the AI growth opportunity with less volatility are the operators of data centres. Data centres are facilities that store, process, and manage the vast amounts of data foundational to AI, ensuring secure and efficient data flow, backup, and recovery. […] Digital Realty recently reported a record sales quarter during which it sold double the data centre capacity of its previous high and about four times more capacity than it usually sells in a quarter.
This reinforces our view that the significant demand for cloud computing and AI-related digital infrastructure is going to unpin attractive returns and long-term growth. […] Our preferred exposure is NEXTDC. It has 17 operational data centres in Australia and nearly a dozen under construction or about to be built across Australasia and Asia.
Morgans currently has an add rating and $20.50 price target on its shares. This suggests that upside of 25% is possible for investors over the next 12 months.
Xero Ltd (ASX: XRO)
Another ASX growth share that could deliver big returns for investors is Xero.
It is a global small business platform provider with 4.2 million subscribers at the last count. Xero notes that its smart tools help small businesses and their advisors to manage core accounting functions like tax and bank reconciliation, and complete other important small business tasks like payroll and payments.
While 4.2 million users sounds like a lot, Goldman Sachs notes that this is only a small portion of its total addressable market (TAM). It estimates this to be over 100 million subscribers across the globe, giving it a significant growth runway. 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 $201.00 price target on its shares. This implies potential upside of 16% for investors.
