ASX tech earnings preview: Zip, Megaport and Computershare

Morgans views on ASX tech companies heading into August reporting season.

Computershare 

Computershare (ASX: CPU) FY22 earnings are unlikely to surprise, according to Morgans analysts.

In May, the company reaffirmed its FY22 guidance of 12% earnings-per-share growth at the Macquarie conference.

"Computershare's strong leverage to rising interest rates means the market is forecasting approximately 45% net profit growth in FY23," the analysts said, warning that "robust outlook commentary is now factored into market expectations."

The broker is Add rated with a $27.54 target price.

Computershare 12-month price chart

Data#3 

Data#3 (ASX: DTL) provided an FY22 guidance earlier this month and expects to deliver another record profit of $44m, up 19% compared to last year.

Morgans analysts said demand for public cloud to be "extremely strong and not slowing" and expect "close to 68%" of the company's revenue to be under contract.

The chip shortage impacted FY21-22 earnings, causing a $3m backlog in FY21 and $6m backlog in FY22. The analysts expect this to occur again in FY23.

The broker is Add rated with a $5.89 target price.

Data#3 12-month price chart

Megaport

Megaport (ASX: MP1) briefly rallied 38% on Wednesday on the back of its June quarter trading update.

The update was in-line with Morgans expectations, which expected positive underlying earnings for the quarter and around $80m of net cash.

The analysts do not expect any surprises come reporting season and expect the business to get close towards cashflow positive in FY23.

"Long-term value creation for Megaport will come from scaling sales globally through channel partners. More details on traction here and plans to accelerate sales will be a critical data point," the note said.

The broker has a Hold rating with a $10.65 target price.

Megaport 12-month price chart

Zip

Morgans expects Zip (ASX: ZIP) to surprise to the downside, with key areas of focus including:

• Bad debts: Zip's bad debts written off surged to 2.6% in the first-half of FY21, up from 1% in the prior period. Zip has guided to bad debts being a similar level in the second-half as the first

• Cash balance: Zip had around $300m at the end of the March quarter, with hopes to reach breakeven by FY24. Analysts warned that capital markets have largely been closed to tech stocks, so "cash burn will be a key focus area"

• Operating expenses: Zip has made substantial moves to reduce its cost base. Morgans expects staff costs to fall by around $30m in FY23

• Sales momentum: "Transaction growth rates appeared to slow materially in 3Q22 (-22% on 2Q22)," the broker said. Growth could stay under pressure as the company redirects its focus towards credit quality and profitability

The broker has a Hold rating with a 60 cent target price.

Zip 12-month price chart

REA Group

Morgans analyst forecast expect REA's (ASX: REA) FY22 net profit to grow 23.7% year-on-year to $404.2m.

Growth should be supported by the implementation of new products (e.g. Premiere+), further investment in branding, SEO and apps, and market share gains in India.

The broker is Add rated with a $144.00 target price.

REA 12-month price chart