The selloff in the tech sector this year has been very disappointing for investors. However, every cloud has its silver lining.
Two ASX tech shares that are highly rated and could be in the buy zone now are listed below. Here’s what you need to know about them:
Altium Limited (ASX: ALU)
The first ASX tech share to look at is this printed circuit board (PCB) focused electronic design software provider. Especially with the Altium share price now down 28% from its 52-week high.
While COVID-19 appears to be weighing on demand in the near term, Altium appears well-positioned for long term growth once it passes. This thanks to its industry-leading platform and a number of tailwinds which are underpinning ever-increasing demand for electronic design software. These tailwinds include the rapidly growing artificial intelligence and internet of things markets, which are leading to a proliferation of electronic devices globally.
One broker that believes the recent weakness in the Altium share price is a buying opportunity is Citi. Earlier this month its analysts retained their buy rating and $33.50 price target on its shares.
Citi believes Altium is nearing the end of the COVID-19 related downgrade cycle and well-placed for growth over the long term.
Nitro Software Ltd (ASX: NTO)
Nitro Software is a software company that is aiming to drive digital transformation in organisations around the world. Its key solution is the Nitro Productivity Suite.
This product provides integrated PDF productivity and electronic signature tools to customers through a horizontal, software-as-a-service, and desktop-based software solution.
It was a very strong performer during FY 2020. For the 12 months ended 31 December, Nitro reported a 64% increase in annualised recurring revenue (ARR) to $27.7 million. This was driven by increasing demand for its popular Nitro Productivity Suite.
Positively, similarly strong growth is expected in FY 2021. Management’s guidance for the year ahead is ARR in the range of $39 million to $42 million. This will mean year on year growth of 41% to 51.6%.
Despite this positive form and guidance, the Nitro share price is trading 20% lower than its 52-week high. One broker that appears to see the weakness in the Nitro share price as a buying opportunity is Morgan Stanley.
Its analysts currently have an overweight rating and $3.70 price target on the company’s shares. This compares to the current Nitro share price of $2.90.
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More reading
- ASX 200 flat: NIB update impresses, Altium upgraded
- This broker just upgraded the Altium (ASX:ALU) share price to a buy
- How to invest like Warren Buffett with ASX shares
- Altium (ASX:ALU) share price tumbles on broker downgrade
- 3 excellent small cap ASX shares to watch closely
James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Altium. The Motley Fool Australia owns shares of Altium. The Motley Fool Australia has recommended Nitro Software Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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