Technology shares have been in freefall since November, with the S&P/ASX All Technology Index (ASX: XTX) losing 23% since then.
But as we see a mini-revival in March, the question remains whether some tech stocks have been sold too much.
After all, interest rate fears have triggered the market to dump high-growth ASX shares — but those rate hikes haven’t actually happened yet.
So is it foolish to buy now when there is more pain to come?
Burman Invest chief investment officer Julia Lee reckons selective buying is key at the moment.
“As interest rates rise, if you don’t have any profit or cash flow coming through then your valuation is going to deteriorate very rapidly,” she told Switzer TV Investing.
“So it is important to back those more mature companies… that do have a stable growth outlook as well as profit coming in through the door.”
As such, Lee named 3 ASX shares that currently fit these criteria:
3 mature companies with a stable outlook
Lee said that the technology sector has “some interesting companies” worth consideration.
“Block Inc CDI (ASX: SQ2)… probably has a valuation north of about $200 and it’s trading at about $180,” she said.
“Altium Limited (ASX: ALU), there’s some strong momentum coming into its business… And Xero Limited (ASX: XRO) has been smashed in the year-to-date.”
The common attribute with this trio, according to Lee, is that they have been reporting good numbers. So the current dip in market valuation is a severe mismatch.
“The share price action has been horrible in 2022 so far,” she said.
“But if you have a look at the fundamentals, there are some companies that have exceeded expectations and are showing strong signs of momentum.”
Lee thought Australian investors might have a false impression of Block because of its association with Afterpay.
“But really, it’s a payments company. So it is exposed to small and medium enterprises. It also helps get websites off the ground.”
The US company announced “quite a good earnings result”, she added.
“The fundamentals and the technicals have been saying something different. But now we’re seeing the share price playing a bit of catch up.”
Right on cue, Block shares spiked up a massive 5.17% on the NASDAQ and 7.49% on the ASX on Wednesday.
The post 3 beaten-down technology ASX shares to buy right now: expert appeared first on The Motley Fool Australia.
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More reading
- Analysts name 2 ASX growth shares to buy
- Is the Xero (ASX:XRO) share price on the way back up to its January highs?
- Why is the Block (ASX:SQ2) share price going gangbusters today?
- Why Block, Calix, Carnarvon, and Imugene shares are racing higher
- Leading the pack! ASX tech shares storm higher on Wednesday
Motley Fool contributor Tony Yoo owns Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Altium, Block, Inc., and Xero. The Motley Fool Australia owns and has recommended Block, Inc. and Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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