ASX tech shares have the potential to deliver strong returns in my opinion. I’m going to talk about two exciting candidates in this article.
I think technology businesses could achieve the strongest shareholder returns, as a sector, over the next three to five years. That’s because of a combination of two or three things – the lower starting share prices, the revenue growth combined with good profit margins, and the possibility of lowering interest rates in future years.
Just because an ASX tech share has gone down doesn’t mean it’s going to rebound quickly. But I’d call these two leading buys today:
Betashares Global Cybersecurity ETF (ASX: HACK)
This may be one of the best-performing exchange-traded funds (ETFs) over the next three years because of the combination of digitalisation of services, ID, and so on, as well as the rise in cyber attacks. Organisations must protect their data.
Medibank Private Limited (ASX: MPL) and Latitude Group Holdings Ltd (ASX: LFS) have been two of the latest to be attacked. When one business is attacked, that entire industry may commit to a stronger form of cybersecurity.
You may have heard of some of the businesses in this ASX tech share’s portfolio including Fortinet, Cisco Systems, Palo Alto Networks, Infosys, Okta, Crowdstrke, Verisign, Akamai Technologies and Cloudflare.
After a decline in the valuation, I think it can do well in the long-term, particularly from the current price.
Audinate Group Ltd (ASX: AD8)
Audinate provides the Dante IP networking offering for users, which is used by the professional live sound, commercial installation, broadcast, public address and recording industries.
It works by replacing traditional analogue cables, transmitting AV signals across large distances to multiple locations at once, using just an ethernet cable.
The return of live events after COVID is really beneficial for the company’s earnings. FY23 half-year revenue increased 39.3% to US$20.6 million, EBITDA (EBITDA explained) jumped 109% to A$4.3 million and operating cashflow improving 231% to A$1.8 million.
It’s positive that the business is profitable with its operating cashflow and EBITDA.
But, Audinate revealed that its sales backlog remains at “record levels”. More growth is in the pipeline it seems. Its video offerings continue to grow, which could unlock a much larger market for the company.
I think this is one of the ASX tech shares that could become a global leader in the long-term, if it executes on its strategy well.
