TSX tech stocks have been the hands-down winners among Canadian broader markets so far in 2020. While the TSX Index has lost almost 10%, tech stocks on average have soared almost 70% year to date. Let’s see whether they still have some steam left or not.
Shopify
The e-commerce giant Shopify (TSX: SHOP)(NYSE:SHOP) stock undeniably has been behind the recent broader market rally. The company began the year with a market capitalization of $66 billion. As of July 2020, it is the most valuable company with a $162 billion market cap.
Higher demand from small- and medium-scale businesses amid the lockdowns and improved growth prospects drove Shopify’s rally this year. But will it continue to rally? What should investors do with Shopify stock at the moment?
I think Shopify will continue to grow at an above-average rate and will outperform broader markets. Its recent partnership with Facebook and Walmart will continue its fuel its superior top-line growth.
The online store enabler has been fast adapting to the transforming world. Its new product launches, which will be launched in 2020, highlight its aggressive growth plans.
However, Shopify’s valuation does not justify the stock price. It looks extremely overvalued and thus is more likely a risky bet. Having said that, a big correction in Shopify at this point looks unlikely, considering the momentum and higher top-line growth potential.
A big one-time investment at this point in Shopify would be imprudent. If investors divide their buying into slices, mainly to benefit from its volatility, the averaging will ensure a lower cost for the overall investment.
Lightspeed POS
Lightspeed POS (TSX: LSPD) was one of the most battered stocks during the COVID-19 crash back in March. The weakness was evident, given its huge exposure to small- and medium-scale physical stores and restaurants. However, the stock has surged almost 200% in the last three months, as business activities gradually resume.
A $2.5 billion Lightspeed is a software company that provides the point-of-sales systems to businesses in more than 100 countries. Its cloud-based platform provides solutions from accounting and inventory management to home deliveries and payments. Lightspeed Payments, which was launched in 2019, presents immense growth potential in the large addressable market.
In the recently reported quarter, Lightspeed reported top-line growth of 70% compared to the same quarter last year. Though it’s a loss-making company at the moment, the stock might continue to trade higher on its superior top-line growth.
Kinaxis
Kinaxis (TSX: KXS) is also one of the top gainers this year, soaring almost 95% so far. The rally is remarkable, as the company was grappling with a number of challenges earlier this year.
The global supply chain came to a standstill amid the pandemic and lockdowns. Its financial performance also took a downturn in the first quarter after a consistent show in the prior quarters.
Kinaxis offers cloud-based software subscription services to better supply chain planning. As businesses reorganize their supply chains once again, Kinaxis will likely see higher-than-usual demand.
Kinaxis stock is currently trading at its all-time high and looks notably expensive. Thus, it remains a risky but attractive investment proposition for aggressive investors.
