Guess which ASX tech stock is Goldman Sachs’ top pick in March

A new month is here, so what better time to make some new additions to your portfolio.

But which ASX stocks could be top options in March? Well, one that has been named as a buy on Friday is tech stock Xero Ltd (ASX: XRO).

In fact, the broker has named the company as its “preferred ANZ Technology pick” this morning.

What is Goldman Sachs saying about this ASX tech stock?

Goldman was pleased with Xero’s inaugural investor day event and came away feeling even more positive on the company.

It has highlighted three key takeaways from the event:

(1) Xero is increasingly positive on its financial outlook, upgrading its use of the Rule of 40 from a ‘useful measure’ to having a formal aspiration to deliver rule of 40 or greater, alongside aspiring to double revenues; (2) The cadence of product releases (both announced and planned) has dramatically accelerated within the 3X3 over the last year (highlights include increase US bank feeds from ~20 to 600 in 12m, alongside launching US bill pay partnership and Just Ask Xero, the GenAI product announced today) – this supports further subscriber and ARPU growth for XRO; and (3) The strength and calibre of Xero’s global management team, which has undergone a significant change over the past year.

Buy rating reiterated

In response to the event, the broker has reiterated its buy rating with an improved price target of $152.00 (from $141.00).

Based on the latest Xero share price of $127.31, this implies potential upside of greater than 19% for the ASX tech stock over the next 12 months. Goldman concludes:

We see Xero as very well-placed to take advantage of the digitisation of SMBs globally, driven by compelling efficiency benefits and regulatory tailwinds, with >100mn SMBs worldwide representing a >NZ$100bn TAM. Given the company’s pivot to profitable growth and corresponding faster earnings ramp, we see an attractive entry point into a global growth story with Xero our preferred large-cap technology name in ANZ – we are Buy rated.

The post Guess which ASX tech stock is Goldman Sachs’ top pick in March appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Friday
• Xero share price falls despite strategy update and new AI solution
• 5 things to watch on the ASX 200 on Thursday
• 3 no-brainer ASX shares to buy under $30
• Leading brokers name 3 ASX shares to buy today

Motley Fool contributor James Mickleboro has positions in Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and Xero. The Motley Fool Australia has positions in and has recommended 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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