Is the tech recovery finally here for Xero and Wisetech shares?

ASX tech names Xero Ltd (ASX: XRO) and WiseTech Global Ltd (ASX: WTC) exploded yesterday. 

WiseTech shares rose 14% yesterday while Xero shares rose 8%, making them two of the top performers on the ASX. 

Both companies were heavily impacted over the last year by AI takeover fears, with SaaS companies hit hard. 

Investors who have held these tech shares through 60%+ losses over the last 12 months will be hoping this marks the beginning of a long-term recovery. 

Why did Xero and WiseTech shares jump yesterday?

There are a couple of factors that might have impacted WiseTech shares yesterday. 

After falling 20% across Monday and Tuesday, it’s possible investors were simply buying the dip on this battered tech stock. 

However it may have also been influenced by the company’s response to recent media reports involving founder Richard White.

Meanwhile for Xero shares, investors are likely searching for value options after it once again received positive guidance from the team at Citi. 

What’s next?

These ASX tech shares now appear at a crossroads. 

The bull case for WiseTech shares is based on its position as a leading global logistics software provider. 

Its CargoWise platform benefits from high customer switching costs, recurring revenue, and long-term growth in global trade digitalisation. 

However, it appears right now the most important factor is regaining investor confidence after allegations against its CEO. 

Meanwhile, for Xero shares, the bull case centres around its strong market position in cloud accounting software, recurring subscription revenue, high customer retention, and continued growth opportunities in international markets. 

The bear case is that its valuation relies on sustained growth, making the stock vulnerable to slower subscriber growth, stronger competition, economic weakness, or delays in improving profitability.

What are experts saying about Xero and WiseTech shares?

Despite very real concerns, experts seem to believe both stocks are trading at attractive valuations.

WiseTech shares closed yesterday at $32.86 each. 

However, the team at Ord Minnett see this as a serious discount. 

The broker has a recent price target of $60 on WiseTech shares along with a retained buy recommendation. 

This indicates an upside potential of 82%. 

Meanwhile, for Xero shares, the team at Citi recently reaffirmed its buy rating and $113.60 price target on the cloud accounting platform provider’s shares.

Based on yesterday’s closing price of $70.31, this indicates 61% upside potential. 

The post Is the tech recovery finally here for Xero and Wisetech shares? appeared first on The Motley Fool Australia.

More reading

• Here are the top 10 ASX 200 shares today
• Top brokers name 3 ASX shares to buy now
• Why Benz Mining, Collins Foods, WiseTech, and Xero shares are shooting higher today
• US chip stocks were smashed overnight. So why are ASX tech shares rising?
• ASX tech giants bounce back from heavy losses

Motley Fool contributor Aaron Bell has positions in WiseTech Global. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended WiseTech Global and Xero. The Motley Fool Australia has positions in and has recommended WiseTech Global and Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.