Shopify (TSX:SHOP)(NYSE:SHOP) has arguably been one of the most consistently oversold stocks trading on TSX. Whenever people think the stock has finally stopped growing and it would take a breather until its fundamentals and sales catch up to the stock price, the stock soars even higher. In this market crash, Shopify’s unprecedented growth was even stronger than usual.
There are many reasons why investors might have stayed away from Shopify, even when the stock cratered during the crash. Some people thought that despite the fact that Shopify fell 35% (from its pre-pandemic peak), it was still not moderately valued. And the stock might have trouble popping up again on investor optimism.
But due to investor sentiment combined with the fact that this crash has been golden for the e-commerce landscape, Shopify has grown magnificently. And investors that didn’t add this oversold growth monster in their portfolios and benefit from its ability to triple their money in fewer than five months might be mad at themselves.
Thankfully, there is still a chance with a stock that’s not as expensive — yet.
A humble software company
While there is nothing humble about the growth pace of the company, the origin of Lightspeed (TSX:LSPD) was humble. Its founder had the vision of empowering SMBs, which he believed to be the lifeblood of thriving communities. While the company’s range of products is essentially centered on e-commerce solutions and a POS system, it is about more than that.
The concept fueling Lightspeed’s e-commerce platform/solutions is equipping SMBs with the right tools to help them thrive in such a data-driven and rapidly evolving market. Most SMBs don’t have the resources and budget to overhaul their internal IT infrastructure to keep up with the market’s ever-changing demands. Lightspeed’s POS and e-commerce solution fills that gap a bit.
The advanced solutions (added in the premium product packages) include accounting, loyalty, and analytics. The ease of having everything connected to one single platform is also one reason why many small retailers might prefer to stick with Lightspeed.
A powerful stock
The worst to best growth of Shopify stock this year was around 224% at its peak. The stock went from $458 per share all the way to $1,487 per share. Fundamental valuation aside, the price tag alone made Shopify too expensive for many investors.
Lightspeed, however, grew almost 300% after the market crash!
The stock is still trading at a price ($43.7 per share) 264% higher than its worst valuation in March. If you missed your chance of buying Shopify, and you believe that it has now grown too expensive to buy, and you might not even buy Shopify if the market crashes again, consider buying Lightspeed. Despite its current growth spurt, the stock isn’t as mature (or oversold) as Shopify.
And if the company continues to improve its product and is able to capitalize on the recovery of SMBs around the world after the devastating economic repercussions of the pandemic, the stock might have what it takes to grow to three digits soon.
The tech sector grew too much, too soon after the pandemic, and many investors fear that the sector is overpriced as a whole. If that’s preventing you from touching a tech stock like Lightspeed, you may want to wait for another market crash. The market is due for a correction soon, and you may be able to pick up the stock at a more reasonable price.
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.
Fool contributor Adam Othman owns shares of Shopify. 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.