Tech stocks are pretty frothy coming into this year. But there are pockets of undervaluation within the sector that I believe has gone largely unnoticed by your average investor. The TSX Index holds some pretty innovative tech players that are at the intersection between growth and value.
Consider BlackBerry (TSX:BB)(NYSE:BB) and Kinaxis (TSX:KXS), two TSX tech stocks that look like terrific buys on recent weakness. At the time of writing, shares of BB and KXS trade are both down around 18% off their 52-week lows. I think each dip is a buyable one for young investors looking to punch their ticket to an outsized gain over the next 18 months.
It’s hard to find a tech stock that provides you with a front-row seat to some of the most lucrative tech sub-industries out there without breaking the bank. As one of the cheapest stocks in the tech scene, BlackBerry is one of the best bargains for those willing to hold for at least the next five years.
The stock recently boomed, then busted, on the news that it had partnered with the great Amazon.com Web Services (AWS) with its IVY project. While the news was a pretty big deal, investors seemed to have shrugged it off just weeks later, as they drew more emphasis on BlackBerry’s fresh quarterly results, which, while pretty solid, didn’t meet the expectation of investors.
I think the recent dip is a gift courtesy of Mr. Market. Project IVY is a big deal, and with the QNX (and hopefully ESS) businesses looking up this year, the stock could make another run past the $10 mark. Most analysts have a “hold” rating on the stock and would rather wait for the firm to post sustained organic growth before slapping on a buy. I’d personally get into the name now before analysts have a chance to beckon over the herd with upgrades, which could be in the cards this year.
While CEO John Chen is an incredible manager, he’s no miracle worker. If you believe in the man and you’re willing to be patient with the name, BlackBerry is ripe for picking right here and now.
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Kinaxis is a wonderful business that’s now trading at a wonderful price following the steep November pullback that followed a multi-month period of consolidation. In technical analysis, the longer a stock flatlines, the more pronounced the pop will be whenever the time comes.
Like a compressed coiled spring, KXS stock, I believe, could be a major upside mover at some point in 2021, as investors realize that there’s still a need for supply chain management solutions, even if this pandemic is to end in the latter half.
In a prior piece, I also brought up the notion that an unprecedented post-pandemic spending boom could cause demand to overwhelm supply. Just because the pandemic is over does not mean Kinaxis’s offering will fall into a nasty hangover.
If anything, the pandemic may have put the incredible Canadian software developer on the map. And for that reason, I think the stock is a buy on the dip, even though the 16x sales multiple may seem steep to some.
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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 Joey Frenette has no position in any of the stocks mentioned. The Motley Fool recommends BlackBerry, BlackBerry, and KINAXIS INC.