It seems like a long time since technology stocks were all the rage.
But it was only 13 months ago when the market was thirsty for anything related to automation. The world was in the midst of the COVID-19 pandemic and it seemed people were more reliant on tech than ever to work, shop, and play.
2022 put an end to all that though.
Even before central banks started raising interest rates to combat inflation, fear had already struck. Tech shares started their plunge in late 2021 and it only got worse as the months passed.
Indeed they are still in the doldrums. The S&P/ASX All Technology Index (ASX: XTX) is now almost 35% lower since November 2021.
But that’s not the end of the story.
More than one expert reckons tech has now been beaten up so much that it might make an excellent contrarian play for 2023.
The idea is that interest rates will stop rising eventually and businesses that are growing will reward investors in the long run.
“Selective exposure to technology stocks is likely to deliver value due to their ability to grow earnings faster than GDP, regardless of interest rate movements,” Morgans investment advisor Jabin Hallihan told The Bull.
Here is a couple of ASX shares that he would stash away right now:
‘High quality’ with pricing power
The share price for Xero Limited (ASX: XRO) has halved since November 2021, with some investors worried about its expansion prospects and a change of chief executive.
But Hallihan would pick it up in a heartbeat.
“This cloud-based financial software company services about 3.3 million businesses across the globe,” he said.
“We prefer high-quality technology companies with net cash balance sheets and pricing power.”
The Morgans team is expecting solid expansion in earnings over the next year or two, and thus feels like the stock is undervalued.
“We’re forecasting earnings per share to grow from 10.6 cents in fiscal year 2023 up to 30.2 cents per share in fiscal year 2024,” he said.
“Our current valuation is $77 a share.”
Xero shares closed Monday at $74.31.
Popular in turbulent times
Telstra Group Ltd (ASX: TLS) has been frustrating to own for many years, but Hallihan’s team is convinced the stock is currently “undervalued”.
“Demand for secure digital infrastructure remains robust,” he said.
“This telecommunications giant is expected to retain its attractive dividend yield, which appeals to income investors in volatile times. Telstra remains the dominant player in Australiaâs telecommunications sector.”
Over the past year, the telco’s shares have fallen more than 5.5%. The current dividend yield stands at 3.36%.
The stock closed flat on Monday at $4.02.
“The company has forecasted total income of between $23 billion and $25 billion in fiscal year 2023,” said Hallihan.
“We have a price target of $4.60.”
The post Tech turnaround: Expert picks 2 ASX shares to buy for a 2023 revival appeared first on The Motley Fool Australia.
Billionaire: “It’s the foundation of how I invest in stocks these days…”
Shark Tank billionaire Mark Cuban built his fortune on understanding technology. So when he says this one development is already taking over the business world, you may need to sit up and pay close attention.
He predicts it will soon become as essential to businesses as personal laptops and smartphones.
And it’s so revolutionary he’s even admitted “It’s the foundation of how I invest in stocks these days…”
So if you’re looking to get in front of a groundbreaking innovation… You’ll need to see this…
Learn more about our AI Boom report
*Returns as of January 5 2023
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More reading
- Here are the top 10 ASX 200 shares today
- Waiting for ASX shares to bottom? Why you could miss out on a stock market rally
- 5 things to watch on the ASX 200 on Monday
- Analysts say these ASX growth shares can generate huge returns for investors
- How I’d invest my very first $500 in ASX shares in 2023
Motley Fool contributor Tony Yoo has positions in Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Xero. The Motley Fool Australia has positions in and has recommended Telstra Group and Xero. 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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