I think there are a number of quality ASX tech shares that look like solid options after the recent falls.
Good investing is all about getting investments at a good price for the long-term. I think that these prices will prove to be attractive over the long-term if businesses can continue growing revenue and scale.
That’s why I like the look of these two ASX tech shares:
Adore Beauty Group Ltd (ASX: ABY)
Adore Beauty is one of those businesses hit heavily. The Adore Beauty share price has fallen by approximately two thirds in 2022. That’s a hefty hit.
The ASX tech share has seen the investor sentiment disappear. However, unlike some e-commerce businesses, Adore Beauty’s revenue does keep growing. In the third quarter of FY22, revenue rose 9% year on year to $42.7 million.
I think that Adore Beauty can take full advantage of the steady shift to online shopping as the market leader in a growing sector.
In my opinion, the upcoming Adore Beauty private label brand is being underestimated by the market. With its large customer brand, I think it will be able to achieve higher profit margins and quickly reach an audience.
With its gross profit margin slowly increasing, I think Adore Beauty will benefit from good operating leverage as it scales.
Xero Limited (ASX: XRO)
Xero is one of my favourite ASX tech shares. I also think it’s one of the highest-quality ones.
For starters, it’s hell-bent on growth. It’s investing most of its revenue into achieving more growth. Over the years, this is the type of strategy that can pay dividends (but just to be clear, Xero doesn’t pay actual dividends (yet)).
Another great thing about Xero is its gross profit margin. While the ASX tech share isn’t making a big net profit for now, the gross profit margin shows how strong it could be in the future as that profitability flows to the other profit lines of the accounts.
Xero still has a long growth runway. Despite already being large and having over 3 million subscribers, I think the level of investment by Xero and the fact that its oldest market – New Zealand – is still growing a solid rate. In the FY22 result, New Zealand subscribers grew by 66,000 to 512,000 total subscribers.
The ASX tech share can expand into other business software, new regions (like Canada) and grow prices for subscribers.
