These tech shares have large market opportunities to grow into in the future…
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If you’re searching for growth shares to buy, then the tech sector could be a great place to search. At this side of the market there are a number of companies with the potential to grow significantly over the next decade.
With that in mind, I have picked out two top tech options that are rated highly. Here’s what you need to know about them:
Nitro Software Ltd (ASX: NTO)
The first ASX tech share to look at is Nitro Software. It is a software company that is aiming to drive digital transformation in organisations around the world with its Nitro Productivity Suite.
The Nitro Productivity Suite provides integrated PDF productivity and electronic signature tools to customers through a horizontal, software-as-a-service, and desktop-based software solution. Demand has been very strong for the product from businesses of all sizes. This has led to the company’s recurring revenue growing at a rapid rate in recent years.
This certainly was the case in FY 2020. For the 12 months ended 31 December, Nitro reported a 64% increase in annualised recurring revenue (ARR) to $27.7 million.
Positively, management appears confident this strong grow will continue in FY 2021. It is guiding to ARR in the range of $39 million to $42 million. This will mean year on year growth of 41% to 51.6%. This is still well short of its total addressable market which is estimated to be $28 billion.
Morgan Stanley is positive on the company. It has an overweight rating and $3.70 price target on the company’s shares.
Xero Limited (ASX: XRO)
Another ASX tech share to look at is Xero. It has also been growing at a rapid rate in recent years. This has been driven by the shift to the cloud and its successful evolution from a pure accounting platform provider into a full-service business and accounting solution to small and medium sized businesses globally.
The good news is that Xero is still only scratching at the surface of its overall market opportunity. In FY 2021, the company reported an 18% increase in revenue to NZ$848.8 million, which was driven by a 20% increase in subscribers to 2.74 million. This compares to the cloud accounting subscriber total addressable market of 45 million.
Goldman Sachs is very positive on Xero’s future. Thanks to its international expansion, the shift to the cloud, and the monetisation of its app ecosystem, it believes the company could have a multi-decade runway for strong revenue growth.
Goldman has a buy rating and $153.00 price target on its shares.
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James Mickleboro does not own any shares mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Xero. The Motley Fool Australia owns shares of and has recommended Xero. 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.