Could these ASX 200 tech shares at 52-week highs go higher? 

The S&P/ASX 200 Index (ASX: XJO) has today pushed to a four-month high above 6,200 points. The recent strength of the broader market has helped ASX 200 tech shares emerge into new higher ground. Could these two ASX 200 tech shares that have recently hit 52-week highs continue to go higher? 

2 ASX 200 tech shares reaching new highs

1. Data#3 Limited (ASX: DTL) 

The Data#3 share price has been on a tear, marking consistently higher highs and less lows since March. This week, it set another record, all-time high of $7.25, an increase of 85% in just this year alone. Data#3 has had the financial performance to back up its share price run, with FY20 revenues increasing by 14.9% to $1.6 billion. It also achieved record profits, with a 30.5% increase on last year’s earnings per share. 

A highlight for the business was the strengthening of its cloud offerings, further cementing its market leadership position nationally. Public cloud is the fastest growing area of Data#3’s business, and is underpinned predominantly by its strong Microsoft Corporation (NASDAQ: MSFT) vendor partnership. The company’s cloud position generated an incredible 60% growth in revenue, ending the year at $581 million.

Despite these positives, I believe it is really challenging to make a buy case for the Data#3 share price at its current price levels. Personally, I would like to see the share price pullback before considering it as a buyable opportunity. 

2. Xero Limited (ASX: XRO) 

The Xero share price has truly gone parabolic in the past month, smashing its previous and momentous all-time high of $100 to close on Friday at more than $113. The company has since gone on to smash that record again today, reaching a new record high of $117.92 in intraday trading. Xero has not announced any market sensitive announcements since its Waddle acquisition back in August.

I can only speculate that the roaring sentiment for ASX 200 tech shares combined with Xero’s market darling status must be the drivers for its recent share price run. While I love the company and its products, for me, the situation is very similar to that of Data#3. I believe the Xero share price would need a healthy pullback to present investors with a better risk/reward entry point. 

Xero typically reports its half yearly earnings in early November. It’s possible that investors have already priced in much of the good news that the company has to report. As such, if there were to be a consequent sell off following release of Xero’s 1H21 report, this could present a more favourable buying opportunity.

Foolish takeaway

Quality ASX 200 tech shares are rarely found in the bargain bin. Data#3 and Xero are both excellent businesses that have delivered phenomenal share price returns. However, I believe buying in at today’s levels does impose a short-term risk, even if the share prices continue to run higher over the medium to long term. As such, I will be waiting for a pullback as an opportunity to reassess and potentially enter. 

More reading

• ASX 200 up 0.9%: Telstra dividend update, Afterpay & Xero hit record highs
• 5 things to watch on the ASX 200 on Tuesday
• ASX 200 Weekly Wrap: Budget, US election sparks 5% surge in ASX shares
• 5 things to watch on the ASX 200 next week
• Why I would invest $10,000 into these fantastic ASX shares today

Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia has no position in any of the stocks mentioned. 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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