3 ASX tech stocks rated strong Buys after the sector has tumbled

Ask the average person on the street what part of the stock market has performed the best in recent years and chances are they'll say tech. 

Led by the ever-powerful Mag 7, global and local tech stocks have enjoyed a stellar few years, but the sheen has come off in recent months, especially on the ASX, as AI dislocation fears and profit-taking have sent many tech stocks crashing back to Earth. 

Aussie tech sold off in 2025

The S&P/ASX All Technology index, which tracks ASX tech companies, is down 13.95% over the last 12 months, and down 26% from its October high. 

The S&P/ASX Information Technology (XIJ) index is also down 19.64% over the last three months and down 9.99% over the last year. 

Given that these indices include many of the ASX's recent darlings like Catapult, WiseTech, NextDC, Xero, Life360, Pro Medicus and 4D Medical, it's a worrying trend for the local tech sector, especially given how global tech, specifically in the US, has held relatively firm after sustained over-performance. 

Of course, much of the recent underperformance is the result of natural pullbacks on stocks that have seen impressive returns over the last few years, and part of a broader sell-off on tech stocks globally. 

But most of the biggest movers like Catapult (ASX: CAT) and Life360 (ASX: 360) have now given up the vast majority of their gains over the last 12 months, and anyone who has bought in recent months will now be nursing heavy paper losses.

Others, like WiseTech, have been obliterated, albeit for other reasons. 

Forager's Steve Johnson says it's something investors should be watching. In Livewire's Outlook Series, Johnson identified a recovery in software stocks as his biggest opportunity for 2026. 

"One factor that's been huge at the back end of 2025 has been the death of software theme. We've seen companies like Xero (ASX: XRO) and WiseTech (ASX: WTC) in Australia fall 40 and 50%, and that's been even more extreme in the US."

But in another recent wire, Johnson also cautions against jumping headfirst into ASX tech stocks, but they're firmly back on Forager's radar. 

"Many of these stocks had become expensive. Despite the recent falls, the share prices of most are still up meaningfully for the year and still aren’t cheap enough (including Xero). We haven’t deployed much capital into the Australian stocks yet, but are a lot closer than we were just three months ago."

"Some of [these stocks] are perceived to be AI losers. The value of software, in a world where anyone can use AI to “vibe code” their way to a new website or app, is significantly diminished. That’s the theory. It is a theory we are willing to bet against at the right price."

It's a sentiment shared by Minotaur's Arms Rosenberg, who told Livewire that her biggest opportunity in 2026 was AI-dislocated tech companies. 

"I think the baby's been thrown out with the bathwater because you've seen a lot of high-quality companies being markedly derated because people think that their business models are under threat from AI," she said. 

"I think that there's a real opportunity in these high-quality, defensible, competitive moats that quality software players have in the whole AI world."

In this wire, we'll be taking a look at three big ASX tech names - Catapult Sports, Life360 and Xero - that are now around 50% off their 52-week highs and what their prospects are now ahead of reporting season. 

1. Catapult Sports (ASX: CAT)

Drop from 52-week high: -51.8%

P/E: -

Broker consensus: Strong Buy

Consensus price target: $6.80 (82% upside potential)

Sports datalytics company Catapult continued to show strong growth in 2025, with annual contract value (ACV) up 20% YoY to US$115.8 million and revenue up 17% to US$67.6 million.

It is a consensus Strong Buy, according to Market Index's Broker Consensus tool, with a consensus price target of $6.80, against a current share price of $3.74.

In November, Morgans reinstated its coverage of Catapult, rating it a Buy due to the company's expanded service offering and new key verticals, including video and coaching. It estimates a CAGR of 20% over the next three years, reaching US$180 million by FY28. 

But the subsequent crash was in part driven by overstretched valuations and profit-taking. As Forager's Steve Johnson said at a recent webinar, the fund decided to sell CAT after momentum left it overvalued. 

"The business was trading at more than ten times forward revenue estimates, and we decided we were getting a very full valuation," he said. It is now trading at closer to five times forward revenue estimates. 

2. Life360 (ASX: 360)

Drop from 52-week high: -52.2%

P/E: 143

Broker consensus: Strong Buy

Consensus price target: $53.83 (103% upside potential)

Like Catapult, Life360 has shown strong operational growth, especially in global markets.

In a recent note, Citi highlighted Life360's US MAUs user figures have now passed 50 million, suggesting net adds in 4Q2025 were 1.3 million plus, ahead of 3Q growth and consensus expectations. 

After selling off sharply when September quarter results showed MAUs had missed expectations, the renewed strength in MAU numbers and the ability to monetise its user base through the recent acquisition of ad-tech platform Nativo suggests Life360 is well-placed for profitable growth.

As Ausbil's David Lloyd highlighted in a recent wire, Life360's offers a "significant ramp of potential advertising revenue per user in their growing global business."

Annualised monthly revenue (AMS) was up 33% YoY in 3Q2025, to US$446.7 million, with adjusted EBITDA up 174% YoY, to US$24.5 million, and operating cash flow up 319% to US$26.4 million.

In Livewire's Outlook Series for 2026, Fidelity's James Abela  picked out Life360 as one of two stocks (alongside Applovin) to benefit from the potential resurgence in tech this year. 

"The two companies are exposed to very similar themes in technology," he said. "It's about productivity and efficiency. It's personal and it's corporate. There's a whole range of themes that are very common across those two ideas. But I do think technology as a group is probably the number one theme that will continue throughout 2026."

3. Xero (ASX: XRO)

Drop from 52-week high: -49.6%

P/E: 66

Broker consensus: Strong Buy 

Consensus price target:  $190.60 (89% upside potential)

Accounting and payments software provider Xero has been one of the few ASX tech names to truly make a name for itself on the global stage. 

But after a prolonged sell-off in the second half of 2025, XRO has given up two years of gains as it looks to grow its global customer base. 

Key to its strategy is the lucrative US market, which prompted Xero's acquisition of US payments provider Melio in late 2025 to give the company a point of difference on competitors like Intuit. Swell Asset Management's Lachlan Hughes argued late last year that Xero could struggle to break into the US market, and the loss-making Melio could hit Xero's profit margins in the short term. 

Overall revenue growth remains strong, with YoY growth up 20% to $1.19 billion in H1 FY26. Average revenue per user (ARPU) is also growing, up 15% YoY to just shy of $50 per user, thanks to price increases and customers upgrading to higher-tier plans. Churn also remains low at around 1% per month. 

As Steve Johnson argued in a wire, Xero may have been a victim of the AI dislocation theme, but still offers a robust software product that should remain in demand. 

"Forager is a user of Xero’s product and won’t be vibe-coding our accounting software any time soon," he said. "Even if we could build an accounting system, software isn’t just about features. Security, backups and constant improvements are at least as important."

Xero is currently rated a Strong Buy, with a consensus price target of $190.60, against a current share price of $99.04. MPC Markets' Mark Gardner picked Xero as a stock likely to rebound from 2025 sentiment lows. 

Are you thinking of adding any of these ASX tech stocks (or others) to your portfolio in 2026? 

Let us know in the comments below.