1 Cheaper E-Commerce Stock I’d Buy Over Shopify

Shopify (TSX:SHOP)(NYSE:SHOP) isn’t the only top Canadian e-commerce stock to buy going into what could be a choppy 2022.

| More on:
Different industries to invest in

Image source: Getty Images

Growthy TSX stocks have been on an incredible run over the past year and a half. But with interest rates on the rise, one shouldn’t expect 2021 to be the end of those tech rotations. Indeed, the value may still have a chance to shine in the new year, as the risks of a market correction look to increase with every percent added to this incredible rally.

Undoubtedly, growth could lead the next downward charge come the next correction, crash, or plunge, which may go unnoticed to passive investors who just watch the indices. Momentum cuts both ways. While it can enrich over a concise time span, it can also deliver an amplified hit right to the chin of an investor. Indeed, it’s tough to dodge and weave once the growth stocks begin rolling over. As such, Canadians looking to bet on growth stocks should be ready to scale into a full position over the next year.

Shopify isn’t the only high-growth TSX stock to buy

Many pundits dub 2022 as a relatively weak year for markets. While we can’t know for sure at this juncture, it’s best to proceed with caution, as many intelligent money managers (including Warren Buffett) isn’t a bad idea at all. In this piece, we’ll check in on one of the best growth plays I’d favour over Shopify (TSX:SHOP)(NYSE:SHOP).

While Shopify is the tech titan atop the TSX Index, the valuation has become quite stretched at over 45 times sales (that’s sales, not earnings!). Valuation always matters. And while Shopify’s growth could justify its incredibly steep price tag, the stock isn’t going to be everybody’s cup of tea at these heights, especially if rates induce a pullback in growth-oriented names.

Consider shares of Lightspeed Commerce (TSX:LSPD)(NYSE:LSPD), a high-growth Canadian stock that could have what it takes to follow in Shopify’s footsteps over the next five years and beyond. Indeed, the firm shares many similar traits to the likes of Canada’s number-one e-commerce titan. Their valuations, while stretched, would also better cater to the crowd that “missed” Shopify on the way up.

Lightspeed Commerce

It’s been a painful past few months for shares of LSPD, plunging from a high of around $160 to a low just south of $70. Short-seller allegations are serious, but certain folks, including the likes of National Bank of Canada’s Richard Tse, think it’s wise to be a buyer on weakness.

Undoubtedly, short-sellers aren’t always spot on with their claims. Exaggeration and overly bold statements may have caused way more selling than was warranted. In fact, some Canadian firms previously targeted by the shorts never deserve to fall to begin with.

I think after such a brutal sell-off that the risk/reward seems slightly tilted toward investors. For those willing to look past the noise, there’s considerable upside to be had if the name is to stage a return to its highs. The $10.4 billion commerce enabler is in a great spot as the economy reopens from COVID, after all.

If it can shrug off short-sellers, as Shopify did a few years ago, this vicious crash could turn into a mere blip in a few years. At 20 times sales, Lightspeed is less than half the price of admission as Shopify, at least from a price-to-revenue standpoint.

The bottom line

While Shopify and Lightspeed have a lot to offer to growth investors, I favour Lightspeed over Shopify, primarily due to valuation. That said, I’m not against being a buyer of both gradually over time.

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 owns shares of and recommends Shopify. The Motley Fool recommends Lightspeed POS Inc.

More on Investing

Silver coins fall into a piggy bank.
Tech Stocks

How to Turn a $500 TFSA or RRSP Into $50,000

Are you looking to convert a $500 TFSA into $50,000? A little discipline and patience can help you achieve it.…

Read more »

Pot stocks are a riskier investment
Cannabis Stocks

5 Things to Know About Cannabis Stocks Before 2023

Cannabis stocks like Canopy Growth (TSX:WEED) are struggling, but there are positives to draw on as well.

Read more »

Stocks for Beginners

3 Best-in-Class Stocks to Build Long-Term Wealth

Looking for stocks that might create generational wealth over the long term? Here's a top growth, value, and income stock…

Read more »

TFSA and coins
Dividend Stocks

TFSA Couples: How to Invest for $777 of Passive Income Each Month

The TFSA or Tax-Free Savings Account can be used to buy and hold a portfolio of blue chip dividend stocks…

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

Investing in the Stock Market Could Turn Your $1,000 Into $100,000: Here’s How

The stock market can convert a $1,000 regular investment into $100,000 without making too risky bets. Here’s a simple strategy…

Read more »

Bank Stocks

3 Top Stocks to Buy Now in a Once-in-a-Decade Opportunity

Given their discounted stock prices, these three quality stocks offer a once-in-a-decade buying opportunity.

Read more »

Various Canadian dollars in gray pants pocket
Stocks for Beginners

Here’s an Absolutely Brilliant Way to Earn Passive Income

Here’s a simple and unique way to earn passive income that does not involve working more, buying a property, or…

Read more »

Make a choice, path to success, sign
Stocks for Beginners

Canadian Investors: 2 Once-in-a-Generation Buying Opportunities

You can grab these two once-in-a-generation buying opportunities in Canada right now to get super rich in the long term.

Read more »