The small end of the Australian share market is home to a number of companies with the potential to grow materially in the future.

Two that analysts at Goldman Sachs believe have huge potential are listed below. Here’s why the broker is tipping them to more than double in value over the next 12 months:

Hipages Group Holdings Ltd (ASX: HPG)

The first ASX small cap share that Goldman is bullish on is Hipages.

It is a leading Australia-based online platform and software as a service (SaaS) provider that connects consumers with trusted tradies.

Goldman Sachs believes Hipages has a compelling long term growth opportunity as it scales to become the leading trade services marketplace in Australia. It has previously likened the company to Carsales.Com Ltd (ASX: CAR) and REA Group Limited (ASX: REA) in their early days.

It said: “In our view, the opportunity for HPG is similar to REA/CAR, which are now the leading online platforms in their respective industries.”

Goldman has a buy rating and $3.60 price target on its shares. Based on the current Hipages share price of $1.34, this implies potential upside of 168% for investors.

Nitro Software Ltd (ASX: NTO)

Another small cap tipped to shine is Nitro Software. It is a software company that is aiming to drive digital transformation in organisations around the world with its increasingly popular Nitro Productivity Suite.

This suite provides businesses with integrated PDF productivity and electronic signature tools. A testament to the quality of its software is that a number of the largest companies in the world use it. This includes over half of the Fortune 500.

Goldman Sachs believes Nitro has enormous growth potential as a challenger in a US$34 billion total addressable market (TAM) across PDF, e-signing and workflows.

It said: “Nitro operates in large, underpenetrated markets supported by structural growth tailwinds including remote work, enterprise digitisation and e-signing adoption. We estimate Nitro can increase its TAM penetration from 0.15% to 1.4% by FY40 implying 9x uplift to Nitro’s current revenue base.”

Goldman has a buy rating and $2.60 price target on its shares. Based on the latest Nitro share price of $1.23, this suggests potential upside of 111%.

The post Goldman Sachs says these small cap ASX shares can double in value appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Hipages Group Holdings Ltd. The Motley Fool Australia owns and has recommended Hipages Group Holdings Ltd. 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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Are you interested in adding some ASX growth shares to your portfolio next week? If you are, you may want to look at the two listed below that have recently been named as buys.

Here’s what you need to know about these ASX growth shares:

Breville Group Ltd (ASX: BRG)

The first ASX growth share to look at is Breville. It is a leading appliance manufacturer which have been growing at a solid rate for years. The good news is that thanks to a combination of favourable industry tailwinds, its investment in research and development, and ongoing global expansion, Breville has been tipped to continue its strong growth over the coming years by the team at Macquarie. The broker currently has an outperform rating and $34.80 price target on its shares.

IDP Education Ltd (ASX: IEL)

Another ASX growth share that could be a buy is IDP Education. It is a provider of international student placement services and English language testing services. While IDP was hit hard by the pandemic, it has returned to form now restrictions are easing. In fact, during the first half of FY 2022, the company reported a massive 47% increase in revenue to a record of $397 million and a 70% lift in net profit after tax to $52.9 million. And with COVID restrictions easing further since then, IDP looks well-placed for a strong second half. Macquarie is also a fan of IDP and has an outperform rating and $35.00 price target on its shares.

Webjet Limited (ASX: WEB)

A final growth share for investors to look at is this online travel agent. As with IDP, Webjet was hit incredibly hard by the pandemic. However, with travel markets starting to rebound, the company looks well-placed to become profitable again in the near future. And with its costs reduced materially during the pandemic, Webjet will be a much more efficient business in the future when trading conditions normalise. Goldman Sachs is very positive and expects Webjet to come out of the pandemic in a much stronger position. As a result, the broker has a buy rating and $6.90 price target on its shares.

The post 3 excellent growth shares experts are tipping as buys appeared first on The Motley Fool Australia.

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• The Webjet share price has leapt 12% in 2 weeks. Could this be the start of something? 
• Why are ASX 200 travel shares taking off on Wednesday?
• Why are Webjet shares still among the most shorted on the ASX
• Here are the 5 best performing ASX travel shares of 2022 so far

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Idp Education Pty Ltd. The Motley Fool Australia has recommended Webjet Ltd. 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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With the S&P ASX All Technology index down materially since the start of the year, a number of high quality shares are trading at sizeable discounts to recent levels.

According to analysts, this may have created a buying opportunity for long term focused investors.

Two ASX tech shares that could be in the buy zone now are listed below. Here’s what you need to know:

Altium Limited (ASX: ALU)

This leading electronic design software provider could be a top option in the tech sector. Especially with its shares down 26% in 2022.

Altium is the company behind the Altium Designer and Altium 365 platforms, the NEXUS design collaboration platform, and the Octopart electronic parts search engine. These platforms are used by some of the biggest businesses and organisations in the world. This includes giants such as Boeing, Microsoft, NASA, and Tesla.

Over the coming years, Altium is aiming to go from leading the electronic design market to dominating it.  The company is targeting 100,000 subscribers and revenue of US$500 million by 2026. If it does deliver on this target, it should be supportive of strong earnings growth over the 2020s.

Bell Potter is positive on Altium. It recently put a buy rating and $41.25 price target on the company’s shares. Based on the current Altium share price, this implies potential upside of 25%.

Megaport Ltd (ASX: MP1)

Another ASX tech share that could be in the buy zone is this leading cloud connectivity and networking solutions provider. Its shares were hammered last week and are now down by over 50% since the start of the year.

The team at Citi believes this is a buying opportunity for investors. While the broker was disappointed with Megaport’s quarterly update, it remains positive on the long term. This is due to the structural shift to the cloud and particularly “demand for multi-cloud connectivity.”

In light of this, the broker has retained its buy rating with a price target of $16.60. Based on the Megaport share price of $9.04, this suggests there is potential upside of almost 84% for investors over the next 12 months.

The post Brokers name 2 ASX shares to buy after the tech selloff appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Altium and MEGAPORT FPO. The Motley Fool Australia has recommended MEGAPORT FPO. 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Netflix‘s (NASDAQ: NFLX) first-quarter earnings report led to a massive one-day share decline. Weak subscriber numbers had investors fleeing the stock, and a poor outlook for adding customers led to a single-day drop of 35%.

But amid the negativity, other numbers indicate that the drop might offer an opportunity to long-term investors. The question is whether those advantages outweigh a glaring weakness that showed up in the subscriber numbers of the entertainment stock. Here are three reasons to buy Netflix and one reason to sell.

1. Valuation

The drop in the stock price following earnings slammed tech investors across the board. Amid a slight decline in its subscriber base compared with the fourth quarter, Netflix stock wiped out more than four years’ worth of gains.

However, its price-to-earnings (P/E) ratio now stands at 20. This is a valuation it has not seen in nearly 10 years. Its multiple is now more comparable to that of Comcast and Warner Bros. Discovery, which sell for 15 and 14 times earnings, respectively.

Moreover, it has become significantly cheaper than Disney (now at 72 times earnings), and it is a radical change from the pre-pandemic days when Netflix typically sold for a P/E ratio of over 100.

2. Financials

And while it does not post the rapid growth of past years, its financial performance remains solid. Revenue of just under $7.9 billion grew 10%. Despite the sequential drop in subscribers, subscriber numbers still rose 7% year over year to just under 222 million.

In contrast, net income dropped by more than 6% in that period to just under $1.6 billion. However, it increased spending on technology development and general and administrative expenses while its interest and other income dropped.

Additionally, Netflix had cash-flow challenges in past years as it had to run up debt to cover content development costs. Nonetheless, first-quarter free cash flow came in at $802 million, 16% higher than 12 months ago. Also, total debt fell by $858 million over the same period, adding strength to its balance sheet.

3. A robust outlook

For all of the concerns about its outlook, its problem came from not meeting investor expectations. Indeed, the forecast of a decline in subscribers of 2 million looks disappointing on the surface.

However, the company still forecasts 10% year-over-year revenue growth. This comes from a cost increase that will take its standard plan from $13.99 per month to $15.49 per month. It also plans a lower-cost, ad-supported option to attract customers who think its current service costs too much, and a move into gaming could increase interest in the platform.

Although analysts forecast a 3% dip in net income for the year, they also believe it will grow by 15% in 2023. Thus, they see its current struggles as temporary.

The reason to sell: A weakened competitive moat

The biggest challenge now for Netflix hinges on whether it has lost its competitive advantage. The company has a history of strong strategic decision-making. Netflix pioneered the streaming industry, and when competitors emerged, it pivoted to proprietary content.

That allowed it to attract subscribers in over 190 countries and helped win awards for its programming. This made streaming the mainstream (pun intended) of television. Now, numerous streaming channels exist, and the major ones offer their own proprietary content.

Indeed, Netflix’s pivots into gaming and ad-supported content could draw subscribers. But without a compelling vision for the future that excites users, its high-growth era could now be over.

Should you consider Netflix?

With a discounted P/E ratio and the prospects of continued revenue growth in the double digits, Netflix might again look like a buy. Despite the competition, viewers continue to tune in to its programming. Also, with rising cash flows, the company could finance a move in a new direction.

But the uncertainty of that direction will likely remain a headwind for the foreseeable future. While Netflix may again beat the market, investors should not expect to see growth numbers comparable to past years.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 3 reasons to buy Netflix, and 1 reason to sell appeared first on The Motley Fool Australia.

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Will Healy has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Netflix and Walt Disney. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Comcast and Discovery (C shares) and has recommended the following options: long January 2024 $145 calls on Walt Disney and short January 2024 $155 calls on Walt Disney. The Motley Fool Australia has recommended Netflix and Walt Disney. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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