The tech sector has been a very difficult place to invest this year due to concerns over a potential global recession and rising rates.
For example, the S&P ASX All Technology index is down by approximately one-third in 2022.
While this is disappointing, the team at Goldman Sachs believe there are still some quality tech shares trading at very attractive prices.
Its analysts have been screening for tech shares that they believe will continue to prosper in the current environment and have picked out their favourite.
Goldman explained:
Given concerns around a global recession and the continued de-rating of the ANZ tech sector, we screen for Australia Technology names (ANZ software companies >$250mn market cap) that look well-placed to navigate a more challenging macro environment based on FCF margins, b/s strength and recurring revenue.
The tech share that came out on top was enterprise software provider TechnologyOne Ltd (ASX: TNE).
What did the broker say?
Goldman likes TechnologyOne due to its defensive qualities, high recurring revenue, and strong long term growth potential.
Defensive end markets (public sector and education) with IT spending that are relatively resilient to recessions (see our initiation here). Contractual CPI pricing pass-through, high recurring revenue, minimal churn (<1%), high margins and net cash are attractive attributes in a slowing economy. In addition, TNE’s recent result highlight continued momentum towards the +A$500mn FY26 ARR target, providing valuable earnings growth visibility over coming years, in our view.
According to the note, the broker has a buy rating and $13.30 price target on the tech company’s shares
Based on the current TechnologyOne share price of $10.20, this implies potential upside of 30% for investors over the next 12 months.
The post Leading broker names the best ASX tech share to buy following 2022’s tech meltdown appeared first on The Motley Fool Australia.
Should you invest $1,000 in TechnologyOne right now?
Before you consider TechnologyOne, you’ll want to hear this.
Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and TechnologyOne wasn’t one of them.
The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.
*Returns as of January 13th 2022
More reading
- Top brokers name 3 ASX shares to buy today
- Why Nufarm, Sayona Mining, Tabcorp, and TechnologyOne shares are falling
- Here’s why ASX 200 tech shares are under pressure on Tuesday
- ASX 200 midday update: Nufarm, Tabcorp and TechnologyOne tumble
- TechnologyOne share price slides despite strong first-half SaaS growth
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. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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