Although the tech sector has rebounded recently, it is still down materially since the start of the year. For example, the S&P ASX All Technology index remains down 30% in 2022.
While this is disappointing, it has dragged a number of ASX tech shares down to very attractive levels.
Two such shares are listed below. Here's why experts rate them highly at present:
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Life360 Inc (ASX: 360)
The first ASX tech share to look at is Life360. It is the company behind the world's leading real time, location-sharing app which is used by over 30 million users.
In addition, the company has bolstered its offering with acquisitions of companies involved with wearables and items tracking. This provides Life360 with cross-selling opportunities to its massive user base.
And while Life360 isn't yet profitable, it does have a hefty cash balance which is expected to be more than sufficient to support it through to breakeven.
Bell Potter is bullish on Life360. It has a buy rating and $7.50 price target on the company's shares. The broker commented:
Life360 develops and delivers a mobile app for families – called Life360 – that provides communications, driving safety and location sharing. The company adopts a freemium model to attract customers but has been successfully converting a portion of these customers to paying subscribers over the last several years by providing valuable features. The company has also recently made two acquisitions – Jiobit and Tile – so that now it not only connects and protects people but also pets and things. Yes Life360 is currently not profitable but is expected to be operating cash flow positive from 4Q2023 and has more than sufficient cash to fund its operations till then.
Xero Limited (ASX: XRO)
Another ASX tech share that could be a top option for investors is Xero.
It is a cloud accounting platform provider which has been growing its subscriber base at a strong rate for many years. But despite now having ~3.3 million subscribers globally, this is only a fraction of its estimated market opportunity of 45 million subscribers.
The team at Goldman Sachs is very positive on Xero and believes it is well-placed to deliver strong gross profit growth in the coming years. Even in this tough operating environment. As a result, it has a buy rating and $113.00 price target on its shares. The broker commented:
While noting that the near term remains robust, we do acknowledge the risk of higher churn from SME business challenges and recent price increases. Nevertheless, we see Xero as well-placed to navigate this uncertainty given the stickiness & importance of its software, and lower levels of churn vs. AU overall. We revise FY23-25 GP [to 22%] to reflect FX and higher churn/ARPU growth (price increases).
