Broker names 2 ASX tech shares to buy in July

If you’re wanting to gain exposure to the beaten down tech sector, then it could be worth considering the two ASX tech shares listed below that Goldman Sachs rates as buys.

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

Megaport Ltd (ASX: MP1)

The first tech share that Goldman rates highly is Megaport. It is a leading provider of elastic interconnection services globally. Its analysts remain very positive on the company’s growth outlook and are forecasting a gross profit compound annual growth rate (CAGR) of 36% between FY 2023 and FY 2025.

The broker explained

While we acknowledge near-term channel execution issues (incl. any potential impact from recent mgmt. departures) and mixed signals on enterprise hardware spending, we continue to see the networking benefits and broader cost savings from MP1’s products to sustain a robust growth profile for the company. Combined with FX upgrades (+7% benefit, with MP1 having >78% revenue offshore), our FY22-25 GP estimates are -0 to +3%.

Goldman Sachs has a buy rating and $9.00 price target on Megaport’s shares.

Xero Limited (ASX: XRO)

Another ASX tech share that Goldman Sachs rates highly is Xero. It believes the cloud accounting company is well-placed to deliver strong gross profit growth in the coming years despite the tough operating environment. The broker is forecasting a gross profit CAGR of 22% between FY 2023 and FY 2025.

Goldman Sachs said:

While noting that the near term remains robust, we do acknowledge the risk of higher churn from SME business challenges and recent price increases. Nevertheless, we see Xero as well-placed to navigate this uncertainty given the stickiness & importance of its software, and lower levels of churn vs. AU overall. We revise FY23-25 GP [to 22%] to reflect FX and higher churn/ARPU growth (price increases).

The broker has a buy rating and $113.00 price target on Xero’s shares.

The post Broker names 2 ASX tech shares to buy in July appeared first on The Motley Fool Australia.

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• This broker sees 30% upside for the Xero share price over the next year
• These were the best (and worst) performing ASX 200 sectors of FY22
• Here’s why Goldman Sachs sees lots of value in the Xero share price

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 positions in and has recommended MEGAPORT FPO and Xero. The Motley Fool Australia has positions in and has recommended Xero. 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 Scott Phillips.

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