Top 5 ASX Technology Stocks for 2024

Top 5 ASX IT companies

The development and marketing of new products is a major factor in Australia's IT sector. These new products are in high demand, especially in the technology industry. Many research and development facilities have been established throughout Australia in response to this demand. Applications and solutions for offshore customers are a focus for several Australian-based technology companies. Developing new goods that can be sold both domestically and abroad is the aim of these endeavors.

Cloud computing, which is the hosting of applications on the internet, is becoming more widespread across various industries. Since the beginning of the internet, Australia has been heavily involved in e-commerce, and businesses have been using cloud computing more and more to increase their capabilities.

Australian businesses need to adopt and adapt digital technologies faster than ever in order to survive in an increasingly online world. By doing this, businesses can increase productivity, increase probability business continuity, and seize opportunities to quickly expand into new markets.

Small businesses can benefit greatly from investing in digital tools to increase their online presence, streamline back-end processes, and change the way goods and services are delivered. Digitalization is not just about big businesses. Businesses with high levels of digital engagement grow at a rate of 28% faster and generate 60% more revenue per employee than those with low levels of engagement.

Source: Australian government, Department of foreign affairs and trade

Here we have presented some of the ASX IT sector stocks that have huge upside potential and might be relevant in the investor’s portfolio. These are as follows:

[Note]: The market cap and the share price of the selected ASX companies below are mentioned as of 12 January 2024.

Dicker Data Limited (ASX: DDR)

Market Cap: $2.07 billion
CMP: $11.49

•    The company's impressive revenue growth, continuous operational improvements, expanded warehouse facilities, and focused cybersecurity initiatives all contribute to consistently delivering value to stakeholders.

•    Its adaptability to market changes and the strength of its offerings firmly establish its competitive advantage. An interesting shift is the increasing share of software revenue, notably fueled by robust growth in subscription and renewable revenue streams.

•    Currently, software constitutes 28% of total sales, while hardware comprises the remaining 72%. Dicker Data adopts a proactive approach by constantly onboarding new vendors, nurturing its sales pipeline, and fostering partnerships to capitalise on emerging opportunities.

Macquarie Technology Group Limited (ASX: MAQ)

Market Cap: $1.68 billion
CMP: $68.82

•    Macquarie holds significant monetary value as an investment, given a range of factors and measures demonstrating a well-rounded overall health with the capacity and expectation for the same to continue in the coming years. The consistent and stable revenue growth, along with the significant jump in profitability, indicates the possibility of the same being replicated in the future.

•    The company also has its operations fairly diversified across a range of segments, with the data centre business having high potential to become the primary focus and source of revenues in the long term.

Megaport Limited (ASX: MP1)

Market Cap: $1.42 billion
CMP: $8.92

•    Megaport Limited has demonstrated recent improvements in its net cash position, which increased by 17% to $38.9 million at the end of the current quarter. However, it is important to note that the net cash position has decreased by 23% when compared to the same quarter in the previous year. This suggests that while there has been recent financial growth, the company's financial position is not as favourable as it was in the previous year.

•    Additionally, the company has experienced a significant increase in the average net trade cycle day’s year on year, indicating a longer cash conversion cycle.

Hansen Technologies Limited (ASX: HSN)

Market Cap: $996.71 million
CMP: $4.905

•    The company's revenue stability, with around 95% derived from recurring sources, lays a solid foundation for consistent performance. The demonstrated 7.8% compound annual growth rate (CAGR) in revenue since FY19 underscores sustained growth prospects. Operationally, the company has proven its efficiency, reflected in the 12.1% CAGR increase in underlying EBITDA, contributing to a robust bottom line with an 18.8% CAGR growth in net profit after tax (NPAT).

•    Shareholders benefit from an impressive 18.0% CAGR growth in earnings per share (EPS). Financial prudence is evident through a strategic reduction of borrowing levels by $131.5 million since FY19. The company's resilience is further emphasised by its diversified customer base, ensuring less vulnerability to dependency risks.

Fineos Corporation Holdings Plc (ASX: FCL)

Market Cap: $696.94 million
CMP: $2.06

•    The strategic partnership between FINEOS and the top 10 group carriers is expected to accelerate growth, leading to a significant increase in subscription fees (up by 75%). The client's additional funding for R&D of the IDAM product will target the top-end employer market, expanding FINEOS' footprint with existing customers and attracting new business.

•    The partnership will also result in the development of new capabilities, enhance FINEOS' product offerings, and better serve client needs. Cost reduction strategies are in place for FY2024 to decrease operating costs by approximately €10 million, involving reductions in direct and indirect costs through efficiency improvements and supplier negotiations.

Reference: *All Data has been sourced from Company announcements and Refinitiv, Thomson Reuters

Frequently Asked Questions (F.A.Q)

What are the top blue-chip ASX IT companies?

•    Wisetech Global Ltd. (ASX: WTC): $24.32B, as of 12 January 2024.
•    Xero Ltd. (ASX: XRO): $16.71B, as of 12 January 2024.
•    NEXTDC Ltd. (ASX: NXT); 7.15B, as of 12 January 2024.
•    Altium Ltd. (ASX: ALU): $6.12 billion, as of 12 January 2024.

Is the IT sector good in Australia?

Jobs related to computers and IT are becoming more prevalent in Australia and around the world. In fact, two of the top ten jobs in Australia that are predicted to grow the fastest in the near future are in the IT and computing fields.

How can small businesses adapt to digital technology?

Small businesses can benefit greatly from investing in digital tools to increase their online presence, streamline back-end processes, and change the way goods and services are delivered. Digitalization is not just about big businesses. Businesses with high levels of digital engagement grow at a rate of 28% faster and generate 60% more revenue per employee than those with low levels of engagement.