New Investors: These Retail Tech Stocks Could Make You Rich

Could Lightspeed POS Inc. (TSX:LSPD) steal the Canadian tech stock crown? Let’s compare it with that other big-name e-commerce ticker.

| More on:
Hand holding smart phone with online shop concept on screen

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Up 15.87% in the last five days at the time of writing, Lightspeed POS (TSX:LSPD) is the breakout Canadian tech stock of the summer. Already a strong contender for a spot in a Canadian stock portfolio with a focus on growth, with an estimated earnings-growth rate of 101.2% over the next three years, this tech unicorn has seen a significant volume of shares getting snapped up by insiders in the last three months.

For newcomers, Lightspeed POS provides retail support software as a service (SaaS) platform for retailers, restaurants, and e-commerce businesses. Having already clocked in returns of 66.14%, an average analyst rating puts this stock as a moderate buy right now, although with a P/B of 10.1 times book and selling at $20 over its fair value, a new investor in tech may want to watch for a dip.

How does Lightspeed POS compare with these e-commerce champions?

Leaping 9.1% last week, the well-branded tech stock Shopify (TSX:SHOP)(NYSE:SHOP) is still a firm favourite with both tech and legal marijuana investors, and the closest competitor to Lightspeed POS. Having released its first-ever global state of commerce report last week, investors and other stakeholders were treated to a breakdown of trends in direct-to-consumer (DTC) commerce and online sales behaviour.

Shopify’s 36-month beta of 1.03 denotes a settled share price that moves in line with the TSX index, though with a P/B of 15.93 times book, it’s definitely on the expensive side in terms of asset valuation. Still, with an estimated three-year earnings-growth rate of 64.1% and a proven track record illustrated by outperforming 12-month returns of 93.92%, Shopify stock is a buy right now.

The average consensus is that Amazon.com (NASDAQ:AMZN) stock is also a buy. Finishing last week up 1.63% in defiance of a rattled market, the ubiquitous tech ticker is, however, currently sitting on rather weak year-on-year returns of 6.79%. Newcomers will also have to weigh overvaluation (see a P/E of 72.59 times earnings and P/B of 17.68 times book) against a moderate expected three-year earnings growth of 31.1%.

Where Shopify has the edge as a stock is in its ease of use as a service. From an accessible, uncluttered interface and straightforward website, its ability to effectively turn any business into an online enterprise means that while Lightspeed POS is a more or less direct competitor in terms of point of sale, Amazon.com is not. There’s also the recent backlash against the FAANG crowd, which Shopify and Lightspeed POS have nothing to do with aside from being tech stocks.

Where the comparison with the FAANG stocks does come in, though, would be with regards to Shopify’s price. However, even given that clear overvaluation, the potential for this stand-out tech stock to defy gravity is real: despite some pundits predicting a nosedive in its share price, Shopify has continued to rise and could continue to do so as its platform grows.

The bottom line

Shopify represents Canada’s foremost multi-channel e-commerce platform and, as such, is a leading stock for tech investors bullish on electronic retail. Lightspeed POS gives it a run for its money, though, storming onto the scene with significant momentum and bringing hefty upside potential. Amazon.com, meanwhile, looks less appealing at the moment with its unwieldy fundamentals and lower growth potential.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Victoria Hetherington has no position in any of the stocks mentioned. David Gardner owns shares of Amazon. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of Amazon, Shopify, and Shopify. Shopify is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

A plant grows from coins.
Dividend Stocks

1 Top Dividend Stock to Buy in August 2022 and Hold Forever

Leon's Furniture (TSX:LNF) stock is one of many quality dividend plays that could face most upside if a recession never…

Read more »

The sun sets behind a high voltage telecom tower.
Dividend Stocks

BCE (TSX:BCE): An Impressive 5.75% Yielder

Canada’s top 5G stock deserves top billing in a stock portfolio because of its Dividend Aristocrat status and impressive 5.75%…

Read more »

edit Back view of hugging couple standing with real estate agent in front of house for sale
Dividend Stocks

Why Real Estate Stocks Are a No-Brainer Addition to Your Portfolio

Real estate stocks, especially REITs, offer some distinct advantages over other types of stocks, making them must-have additions to most…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

3 Top TSX Dividend Stocks to Buy for Monthly Passive Income

Top TSX stocks with monthly dividends now trade at cheap prices for investors seeking passive income.

Read more »

Canadian Dollars
Dividend Stocks

Create Free Passive Income and Turn it Into Thousands With 1 TSX Stock

If you can't afford to invest, you can certainly create passive income another way and use that to invest in…

Read more »

Payday ringed on a calendar
Dividend Stocks

Canadian Dividend Investors: 2 ETFs That Pay Monthly Income With High Yields

Dividend ETFs often pay out monthly distributions compared to dividend stocks.

Read more »

think thought consider
Dividend Stocks

2 Stocks I Own and Will Buy More of if They Fall

Stocks tend to go up in the long run. Therefore, buying a basket of diversified stocks on dips should lead…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

2 Oversold TSX Dividend Stocks to Buy for Passive Income

Blue-chip dividend stocks such as Royal Bank of Canada and Manulife Financial pay investors a tasty forward yield.

Read more »