TSX-listed tech stocks witnessed sharp selling in the recent past. Stretched valuations and expected normalization in demand weighed on investors’ sentiments. While the high-flying tech stocks could witness moderation in growth rate in the near term, I am bullish on top Canadian tech stocks and see the recent pullback as an excellent opportunity to invest for the long term.
Here are the five top TSX tech stocks that have reversed some of their gains but are likely to deliver strong returns in the long term.
Docebo (TSX:DCBO)(NASDAQ:DCBO) stock is down about 38% from its 52-week high of $86.64, as the economy’s reopening indicates a slight moderation in demand. While the growth rate could moderate a bit in the short term, I believe the recent decline presents a solid buying opportunity for the long term. The AI-powered learning platform provider continues to deliver consistent organic sales growth.
Its annual recurring revenue remains strong. Meanwhile, growth in average contract value, the addition of new customers, and multi-year deals bode well for growth. With sustained momentum in its base business, accretive acquisition, product expansion, and a large addressable market, Docebo could continue to deliver impressive growth.
Shares of Absolute Software (TSX:ABST)(NASDAQ:ABST) have declined by about 30% from its 52-week high. Despite the recent selling, I am bullish on Absolute Software, thanks to the favourable industry trends, growing annual recurring revenues, and robust product pipeline.
I believe the spending on cybersecurity threats to continue to increase, providing a solid base for growth. Meanwhile, customer expansion, high retention rate, zero debt balance sheet, and low direct competitive activity augur well for future growth.
Shopify (TSX:SHOP)(NYSE:SHOP) stock has lost a significant amount of value in the recent past, as the company expects the shift rate towards the omnichannel platform to normalize in 2021 as compared to 2020. Despite the expected normalization in demand, I expect Shopify to continue to benefit from the increased spending on the e-commerce platform.
Shopify’s growing fulfillment network, up-selling opportunities, multiple sales channels, and increased demand for its payments platform position it well to capitalize on the favourable industry trends. Meanwhile, international expansion, innovation, and operating leverage are likely to accelerate its growth rate and drive its stock higher.
Dye & Durham
Dye & Durham (TSX:DND) stock has reversed a significant portion of its gains and looks attractive at the current price levels. The reopening of the economy and courthouses suggests that the demand for its products and services could remain elevated. Meanwhile, its large customer base, long-term contracts, and high customer retention rate further strengthen my bullish view.
Dye & Durham is also expected to benefit significantly from its appetite for accretive acquisitions. The company made series of strategic acquisitions in the past that accelerated its growth rate, expanded its geographical reach, and drove its customer base. I believe opportunistic acquisitions could continue to accelerate Dye & Durham’s growth rate in the coming years. Meanwhile, its adjusted EBITDA is likely to grow at a breakneck pace over the next couple of years.
Like its tech peers, Lightspeed POS (TSX:LSPD)(NYSE:LSPD) stock also witnessed a fair amount of selling in the recent past and is down about 25% from its 52-week high. The selloff in Lightspeed stock offers a good entry point for long-term investors.
Lightspeed is likely to continue to deliver stellar returns on the back of favourable industry trends, higher demand for its omnichannel payment platform, and new product launches. Meanwhile, its expansion in the high-growth U.S. market, accretive acquisitions, growing scale, increase in customer base, and up-selling opportunities are likely to support its financials and, in turn, its stock.
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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 Sneha Nahata 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.