ASX tech shares are hot property right now but I think it pays to be selective. Much of the focus has been on the ‘WAAAX’ shares like Afterpay Ltd (ASX: APT) and Xero Limited (ASX: XRO).
However, there are more tech companies that are doing well in the current climate with further growth on the cards. Here are a couple of my favourite picks in the S&P/ASX 300 Index (ASX: XKO) right now.
Data#3 Limited (ASX: DTL)
Momentum has been propelling the Data#3 share price higher in recent months. Data#3 is a leading cloud computing and ICT solutions provider that is fast becoming a market leader.
The ASX tech share is up 75.3% in 2020 and 475.7% in the last 5 years. The group now boasts a market capitalisation of more than $1 billion with a 2.1% dividend yield.
I think finding ASX tech shares with a combination of dividends and growth is a tough proposition right now. The price to earnings (P/E) ratio of 43.3x is a little pricey but I believe the growth could be there to justify it.
If we continue to see more customer growth and strong revenue generation, I could see the Data#3 share price continuing to climb in 2021.
Megaport Ltd (ASX: MP1)
Megaport was founded in 2013 by entrepreneur and Nextdc Ltd (ASX: NXT) founder, Bevan Slattery. The company has grown quickly to become a leading Australian internet service provider.
Megaport offers scalable bandwidth for public and private cloud connections, metro ethernet, and Data Centre backhaul as well as Internet Exchange Services.
The Megaport share price has jumped 57.0% higher this year alone and 649.5% in the last 5 years. The company now boasts a market capitalisation of $2.5 billion and could be headed higher.
I like the fundamentals underpinning its growth including an accelerated move towards cloud technology. The group has strong monthly recurring revenue numbers and is aiming for earnings before interest, tax, depreciation and amortisation (EBITDA) breakeven in FY2021.
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More reading
- 3 ASX shares making all-time highs today
- 2 ASX tech shares I’d buy with $10,000
- 3 top ASX ETFs to buy for long-term growth
- 3 mid cap ASX shares to buy for strong potential returns
- Why the Data#3 (ASX:DTL) share price just stormed to a record high
Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends MEGAPORT FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended MEGAPORT FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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