The Motley Fool

3 High-Growth TSX Stocks That Led the Recent Tech Rout: Buy the Dip?

Image source: Getty Images

Canadian tech stocks—the stalwarts of the recent broad market rally, are increasingly showing signs of weariness recently. The tech sector continued to plunge for the fourth straight day on Tuesday, taking the TSX Index lower along with it. The weakness is very much on the expected lines after a steep rally, and further correction can’t be ruled out completely. Let’s see what’s in store for investors.

The biggest beneficiary of the pandemic

Canadian tech behemoth Shopify (TSX:SHOP)(NYSE:SHOP) has plunged almost 20% in the last four trading days. Interestingly, the stock is still sitting at a handsome gain of 135% so far this year.

Shopify’s financials and its stock price have been a massive divergence for the last few years. The stock’s rally has been much steeper compared to its earnings or even revenue growth. Notably, Shopify stock looks overvalued even after its 20% decline.

Shopify has undoubtedly been one of the biggest winners of the pandemic. Its second-quarter revenue growth highlighted the increased demand from small businesses to go digital. A large addressable market and the booming e-commerce sector will likely continue to underpin its growth.

The recent dip is certainly a buying opportunity for long-term investors. Shopify stock has given a very few of such opportunities in the past. I have seen many investors that kept procrastinating and envying on Shopify’s epic rally.

Top TSX tech stock Lightspeed POS

Lightspeed POS (TSX:LSPD) stock fared relatively better in the recent tech turmoil. It lost around 11% since last week and is up about 20% so far this year.

A $3.4 billion tech company Lightspeed offers a cloud-based software platform to small- and medium-sized businesses. It improves customer management, payments, analytics, and better operations management.

Lightspeed has seen superior revenue growth in the last few quarters. It has been expanding its e-commerce solutions amid the pandemic.

However, Lightspeed is still a much smaller fish in a huge pond. Shopify’s revenues last year were $1.6 billion, while Lightspeed’s revenues came in at $120 million.

A dark horse in the ride-hailing industry?

Shares of climate-friendly Canadian ride-hailer Facedrive (TSXV:FD) were also at the receiving end recently amid the tech rout. They tumbled almost 30% since last week. Smaller tech stocks were even more vulnerable in the sector’s weakness recently. This $1.3 billion tech company stock is still up more than 600% year to date.

Facedrive is a newcomer in the ride-sharing industry with a motive of a greener future. It offers riders options like EVs, hybrids, and traditional gas-fuelled cars. Facedrive’s environment-friendly positioning is expected to entice an increasing number of millennials, which could help it gain market share from the established players.

Facedrive is aggressively expanding into food delivery and corporate ride-sharing verticals. The pandemic and travel restrictions could have delayed its growth plans. However, it could be a dark horse in this flourishing transportation-as-a-service industry.

I’m keeping a close eye on its upcoming quarterly earnings. Its revenue growth in the last couple of quarters was highly inspiring, and a continued performance for the next few quarters will give more clarity about its growth path ahead.

Looking for more growth stocks?

This Tiny TSX Stock Could Be the Next Shopify

One little-known Canadian IPO has doubled in value in a matter of months, and renowned Canadian stock picker Iain Butler sees a potential millionaire-maker in waiting...
Because he thinks this fast-growing company looks a lot like Shopify, a stock Iain officially recommended 3 years ago - before it skyrocketed by 1,211%!
Iain and his team just published a detailed report on this tiny TSX stock. Find out how you can access the NEXT Shopify today!

Click here to discover how!

Fool contributor Vineet Kulkarni has no position in any of the stocks mentioned. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Shopify and Shopify. The Motley Fool owns shares of Lightspeed POS Inc.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.