The beauty of tech stocks lies in their immense growth potential. But at the same time, they are prone to disruptive technology, which could drop them off the cliff. During the smartphone revolution, anyone who invested in Apple became a millionaire in 10 years.
The world is moving to the digital age, and the coronavirus is only accelerating this digital shift. The Software-as-a-service (SaaS) industry is the future of technology.
The SaaS revolution
Today, everything from shopping to payments to video calls to document transfers to games and movies happens on the cloud. The cloud records these transactions, identifies the patterns, and optimizes the processes. Moreover, SaaS services are cost-efficient, giving you the flexibility to access the software from any device with an active internet connection.
The technological advancements in 5G, artificial intelligence, internet-of-things, drones, and robotics will put everything on the cloud. The need for endpoint security will increase. Just as smartphone has become a necessity today, SaaS will become a necessity 10 to 15 years down the line.
The stock market rewards early investors. Those who invested in SaaS IPOs of Shopify (TSX:SHOP)(NYSE:SHOP) and Lightspeed POS (TSX:LSPD) in May 2015 and March 2019 are seeing five years of growth in 2020 alone as the pandemic has accelerated the move to digitization.
If you had invested $10,000 each in the above two IPOs, your money would have grown to more than $400,000. It’s okay if you have missed this stock rally. The SaaS revolution has just begun. You can still convert your $10,000 into $100,000 by investing in the SaaS stocks of the future.
Lightspeed POS – the next SaaS growth story
Lightspeed POS started on the e-commerce journey in 2016, whereas Shopify has been serving this market for over a decade. The former started as the cloud-based point-of-sale (POS) payment solutions provider for retailers and restaurants. Its objective was to integrate the in-store platform with an e-commerce store, giving merchants an omnichannel solution.
The company is catching up fast to the e-commerce trend and increasing its transaction volume. In April, it saw a 400% increase in the e-commerce volumes compared to February.
In the wake of the pandemic, Lightspeed is expanding its e-commerce solutions to enable merchants to not miss a single sale because of the physical distancing restrictions. It has introduced features like appointment booking, multi-location inventory check, curbside pickup, and shipping services.
Retailers and Restaurants can now offer their consumers an option to book an appointment, check if the product they want is in stock at the local store, and even schedule their pickup.
These features will help merchants maximize their sales while maintaining safety measures. The company is also looking to allow merchants to open their online store on its platform.
Last year, Lightspeed’s revenue rose 55%, which is faster than Shopify’s 40% growth. Lightspeed’s e-commerce efforts could accelerate its revenue growth. These efforts have already revived investors’ confidence, driving the stock up 200% from its March low.
It is a growth stock and is still trading at 28.4 times its sales per share. Shopify traded at this valuation in the pre-pandemic economy.
Now, Shopify is trading above 90 times its sales per share. It is difficult to say whether Lightspeed can replicate Shopify’s growth story, but it’s surely is moving in that direction.
BlackBerry (TSX:BB)(NYSE:BB) is the most misunderstood stock as investors are still not able to accept it as a software stock. They are hinging on the 2007 fall of the BlackBerry mobile device whose market was disrupted by Apple.
Unable to compete with Apple’s iPhone, BlackBerry gave up on mobile devices and played on its strength as a “secure platform.” Its mobile phones were preferred because of their secure messaging platform.
Hence, BlackBerry transformed from hardware to endpoint security and became a leading player in the automotive security solutions space. Cars are becoming more complex as we move toward autonomous vehicles, driving the need for cybersecurity.
The company is still not making profits, as it is in the transformational stage. However, it has enormous growth potential as investors come to realize the value of the company’s solutions.
Lightspeed and BlackBerry are investing in future SaaS solutions and have the potential to deliver triple-digit returns in the long term.