Nitro Software Ltd (ASX: NTO) and Bigtincan Ltd (ASX: BTH) have been called out as small cap ASX tech shares to buy.
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2 ASX tech shares brokers rate as a ‘buy’
1. Bigtincan Holdings Ltd (ASX: BTH)
The Bigtincan share price has struggled since its October 2020 quarterly update, which revealed a soft first quarter with revenues falling 15% and no explanation given for the decline. Since the poor announcement, its shares have drifted 30% lower to an 8-month low around the 90 cent level.
The company’s more upbeat half-year results highlighted a 33% increase in revenue to $18.9 million and net profit after tax loss of $7.9 million, but this was unable to sway investors, with its shares slumping another 9% on the day of the announcement.
Analysts from Sequoia Financial Group Ltd (ASX: SEQ) see a number of potential share price catalysts and growth drivers that could push the Bigtincan share price higher in the short-medium term. These include major new customer wins, progress with integrations and potential new acquisitions. The report also noted broader growth drivers for the company such as the continued growth in cloud, remote working and mobile businesses, and greater
The broker upgraded the stock from accumulate to a buy rating on 26 February with a 12-month price target of $1.27, representing an upside of 38%.
2. Nitro Software Ltd (ASX: NTO)
The Nitro share price has fallen to a 7-month low despite a strong set of FY20 results announced last week. The company delivered a 13% increase in revenues to $40.2 million, subscription revenues surged 61% to $21.3 million while gross profits increased 65% to $36.5 million. Its earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of $2.4 million was also in line with its guidance of $2.1 million to $2.6 million.
Looking ahead, Nitro plans to launch its “Nitro Sign” product before 21 June. The equity research team from Wilsons says that this should see an “incremental revenue contribution from the standalone product as adoption ramps up”.
The broker notes that in line with the company’s medium-term growth strategy, it will continue to scale headcount, new product development and potential M&A. At the expense of accelerating its potential growth, FY21 is estimated to deliver a widening EBITDA loss of approximately $12 million.
As the company seeks to further drive revenue growth, its FY20 results forecast FY21 to deliver annual recurring revenue of $39 million to $42 million and revenue between $45 million to $49 million, ahead of the broker’s estimates.
Wilsons has updated its 12-month price target to $3.93, which represents a 45% upside to its closing price on Tuesday.
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Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends BIGTINCAN FPO. The Motley Fool Australia owns shares of and has recommended BIGTINCAN FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Nitro Software Limited. 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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