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Here are 5 companies that we think are the best ASX tech stocks for October!
The 5 best ASX tech stocks for October!
1. ReadyTech (ASX:RDY)
ReadyTech (ASX: RDY) is a provider of SaaS technology in Australia and operates in three segments: Education, Workforce Solutions and Government and Justice. It does not have the strongest EBITDA growth, but it is trading at a very cheap multiple. The reason for this is a takeover bid falling through, not because the suitor walked away or even ReadyTech itself, but because key institutional shareholders did not want to give it away before realising its growth potential.
We think the transition to the Cloud is still at an early stage and that ReadyTech is well positioned to capitalise. It is a strong investor in R&D and M&A activities to keep up with the competition. We also wouldn’t be surprised to see it be pursued by M&A suitors again.
2. Xero (ASX:XRO)
Xero (ASX:XRO) is one of the ASX’s best-performing tech stocks over the last decade, offering accounting software helping SMEs do business. It has gone beyond accounting and provides services including inventory management and even Cloud storage.
It has well and truly rebounded in CY23 as investors realise it is a staple rather than a discretionary for its customers and this showed in its recent annual results. And yes there is more to come. Consensus estimates for FY24 (drawn from 16 analysts) call for $1.6bn in revenue (up 19%) and $445.1m in EBITDA (up 81%). These put it at an EV/EBITDA of 34.1x, a multiple that investors may consider high at first glance, bit its EV/EBITDA-EBITDA growth ratio is low and, hence, makes the stock attractive. The company will be releasing its half-yearly results in November (because it uses the New Zealand fiscal year). Therefore, investors won’t have to wait too long for the next update from the company.
3. Data#3 (ASX:DTL)
This tech stock is in IT services – not the sexist space by any means but one of the most critical. This company was sold off after its FY23 results after they fell short of consensus estimates. Looking further ahead, consensus estimates for FY24 they expect $2.9bn in revenue (up 16%) and 26c EPS (up 8%). So we think it can slowly recapture some it its growth over the next few months.
4. Atturra (ASX:ATA)
Another IT services stock, this stock has been a solid performer since its listing at the end of 2021. Its results in FY23 were very good with 33% revenue growth and 32% NPAT growth.
It has reported solid demand for its products and services continuing to start FY24, aided by the recent acquisition of Somerville. Granted, there has been some disruption to some federal government contracts as a result of the controversy around big consulting groups like PwC. But this could ultimately play into Atturra’s advantage, with smaller companies like ATA now having a better opportunity to step in.
5. Weebit Nano (ASX:WBT)
We acknowledge there’s volatility with this company. But long-term investors who’ve been around for a few years are still well ahead. We don’t have time to delve into the full story – investors new to it can read more here.
But we think this is a pivotal point for its Non-Volatile Memory technology called Resistive Random Access Memory (ReRAM), because it is being commercialised with its first partner, US-listed semiconductor foundry SkyWater (NDQ:SKYT). We think there’s a lot of good news flow to come, not only cash flows from SkyWater but also future partners coming onboard.
Disclosure: Stocks Down Under directors own shares in WBT.
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