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Investors interested in Canada’s tech sector have a few options. CGI Group Inc. (TSX:GIB.A)(NYSE:GIB), BlackBerry Ltd (TSX:BB)(NASDAQ:BBRY), and Sierra Wireless Inc. (TSX:SW)(NASDAQ:SWIR) are major players in Canada’s tech sector, but which of these companies is the best investment? We will look at the strengths and weaknesses of each company.
CGI Group Inc.
CGI Group Inc. provides information technology and business process services, and has grown rapidly through acquisitions to become the fifth-largest provider of such services around the world. The company’s rapid growth shows no signs of stopping anytime soon. The company’s CEO has an aggressive growth plan and wants to double CGI’s size in the next five to seven years.
Doubling the size of a company in such a time frame is no easy feat, but the company’s track record of making successful acquisitions is one major positive in its potential to meet this aggressive growth target. Another reason why this growth target is obtainable is that it is well cemented in its industry, and has few competitors.
Sierra Wireless Inc.
Sierra Wireless is a popular stock due to its status as a specialist in the Internet of Things (IoT), but many analysts think that the company’s position in a hot sector has made the stock overvalued, relative its financials.
Many believe that IoT, software and hardware that allows tech devices to communicate with everyday objects will be the next tech boom, and for that reason investors have been flocking to Sierra Wireless, which holds the top global market share of IoT.
But the company’s financials have been less than stellar. Sierra Wireless posted a loss in 2014. Many think that the stock value is based on investors’ faith in the growth potential of the company and that they are overlooking the financial flaws. If that is the case, the company needs the IoT demand to boom, or the stock will likely be a bust.
BlackBerry is in the midst of a major turnaround, a welcome relief for a company that just a few years ago appeared to be on the verge of bankruptcy.
At BlackBerry, things have been on the upswing since John Chen became CEO of the company. Chen has cut costs and improved the company’s offerings since he took over as leader. When Chen first started as CEO, he thought the company had a 50% chance of surviving, but now he sees the odds at 99%.
Which is the best choice?
If you want to bet on a turnaround stock that isn’t too risky, then BlackBerry is a great pick. The company is still headed down the path to recovery and could see more gains in the future. If you are a believer in the IoT, then Sierra Wireless is your best bet. BlackBerry’s expansion into the IoT, however, should be concerning to Sierra Wireless investors. The nice thought about choosing BlackBerry over Sierra Wireless is that it has products beyond IoT to fall back on in case that sector is a bust.
Out of the three companies, CGI Wireless is my favourite. It is well positioned in its industry and has aggressive growth targets, and such lofty growth targets will mean that the company should obtain a very strong increase in its value.
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