Tech rebound: Bell Potter says this ASX 300 stock is a top buy

If you are looking for exposure to the rebounding tech sector, then it could be worth considering the ASX 300 stock in this article.

That’s the view of analysts at Bell Potter, who have named it as one of their top picks in the sector.

Which ASX 300 tech stock?

The stock that Bell Potter is recommending to clients is Catapult Sports Ltd (ASX: CAT).

It is a leading global provider of wearable tracking solutions for professional athletes.

Bell Potter notes that its key target market is elite sporting teams and organisations and the acquisition of SBG in 2021 also now gives the company a presence in motorsports.

This is a big market. It highlights that the pro sports technology market is currently valued at US$36 billion and is forecast to double to US$72 billion by 2030.

What is the broker saying?

Bell Potter notes that Catapult released its investor day update this week and was relatively pleased with it. It said:

We have made further adjustments to our Catapult forecasts following the analyst day yesterday. The two key changes are: 1. Increasing our SBP forecasts from US$23.5m to US$26.0m in FY26 and US$30.0m to US$35.0m in FY27 (no change in FY28); and 2. Increasing our D&A forecasts by US$1.0m, US$3.1m and US$3.3m (or 3%, 7% and 7%) in FY26, FY27 and FY28 due to higher amortisation of acquisition intangibles related to IMPECT than we had originally forecast.

The net result is no change in our management EBITDA forecasts, downgrades of 20% and 24% in our statutory EBITDA forecasts in FY26 and FY27 and downgrades in our statutory NPAT forecasts (which are already losses). We note that the downgrades are all non-cash and our cash flow forecasts are little changed.

Positive outlook

Overall, Bell Potter remains very positive on the ASX 300 tech stock’s outlook and believes that management’s bold growth targets are achievable. It concludes:

The other key take-out from investor day is that the medium-term targets remain on track and the outlook remains positive. The key target is ACV of US$200m+ in “2-3 years” which in theory will be achieved by reaching 5k pro teams (vs c.4k now) and ACV per pro team of c.US$40k (vs c.US$30k now). The key to achieving this ACV target will be the increase in ACV per pro team which will require both an increase in the number of multi-solution teams and the average number of solutions per team.

Both of these look well achievable with Catapult highlighting that c.27% of its pro team customers now taking more than one solution – versus just c.14% in FY23 – and the number of solutions has increased significantly over the past few years from both investment in new products (like Vector Core) and acquisitions (like SBG, Perch and IMPECT). We forecast Catapult to reach ACV of US$200m+ in FY29 – our forecast is US$207m – so our forecasts are consistent with the medium-term target.

In light of this, it has retained its buy rating and $4.75 price target on Catapult’s shares. Based on its current share price of $3.44, this implies potential upside of 38% for investors over the next 12 months.

The post Tech rebound: Bell Potter says this ASX 300 stock is a top buy 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. has positions in and has recommended Catapult Sports. The Motley Fool Australia has positions in and has recommended Catapult Sports. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.