Xero Limited (ASX:XRO) and this ASX tech share could be the ones to buy right now. Here’s what you need to know…
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Although the tech sector has started the year in a subdued manner, it still remains a favourite of investors. And given the quality on offer in the sector, this isn’t overly surprising.
So, if you’re looking to invest in the sector, then you might want to take a closer look at these tech shares:
NEXTDC Ltd (ASX: NXT)
The first tech share to look at is NEXTDC. It is a leading data centre-as-a-service provider with a growing network of centres in key locations across Australia.
While the shift to the cloud has been happening over the last decade, the COVID-19 pandemic has accelerated this shift significantly and underpinned insatiable demand for capacity in data centres. This led to NEXTDC reporting strong revenue and operating earnings growth in FY 2020, with more of the same being guided to in FY 2021.
The good news is that the company still has a long runway for growth both at home and internationally. In respect to the latter, NEXTDC recently opened up offices in Tokyo and Singapore with a view of expanding into these markets in the future.
Morgan Stanley is a big fan of the company and recently put an overweight rating and $14.60 price target on its shares. This compares to the latest NEXTDC share price of $11.56.
Xero Limited (ASX: XRO)
Another tech share to look at is Xero. This New Zealand-based cloud-based business and accounting software provider is quickly becoming an invaluable resource for small businesses across the world.
At the last count, Xero had 2.45 million subscribers and was generating half year operating revenue of NZ$409.8 million. However, this is still only a very small portion of a total addressable market (TAM) estimated by Goldman Sachs to be worth NZ$14 billion per annum at present across its key markets.
But perhaps best of all, is that Goldman believes its TAM can grow by a further NZ$62 billion in the future if it successfully broadens and monetises its app ecosystem and expands into new geographies.
In light of this, it believes Xero has a multi-decade runway for strong revenue growth and has put a buy rating and $157.00 price target on its shares.
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James Mickleboro owns shares of NEXTDC Limited. 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. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.