Tech stocks across the globe crashed in 2022, as fears of Omicron increased. This is the third major dip tech stocks have witnessed in the last 12 months. Is this a sign of a tech bubble burst or more profit booking from investors? To answer that question, you need to look at the market and its ability to support growth. Nothing has changed from the long-term perspective. This means the dip is short term, and the tech stocks could bounce back once the Omicron fear eases. With the government fiscal stimulus fading, investors are probably cashing out their risky investments.
Time to buy three stocks at cheap prices
This is a good time to buy three growth stocks at cheap prices, as they rebounded after a dip in the past three events.
- Constellation Software (TSX:CSU)
- Shopify (TSX:SHOP)(NYSE:SHOP)
- Descartes Systems (TSX:DSG)(NASDAQ:DSGX)
The above three stocks are leaders in their own spaces and use software solutions to address critical pain points of evolving businesses. The three are not immune to competition, but their strong foundations and market share make them good stocks to buy the dip.
Constellation is in a long-term uptrend, growing gradually from $80 in 2012 to over $2,160 in 2022 — a 26-fold increase in 10 years. You may argue that 2010-2020 was the decade of software. Everyone moved to software, which led the way to today’s data-led economy. During this software boom, Constellation acquired over 260 vertical-specific software companies that serve a niche market. The niche market removed the biggest threat software companies face: competition.
Constellation has built a robust business serving over 125,000 customers in over 100 countries. The company continued to acquire new businesses and maintain a stable revenue growth rate. The pandemic and the overall tech industry impacted Constellation’s share price in the short term, but it could bounce back to its long-term growth trend. The stock fell between 6-9% in the last two dips of 2021, only to rise 16-27% in the following months.
In the current tech sell-off, Constellation stock fell over 9%. The stock has bottomed out and is now returning to growth. This is the right time to buy a long-term growth stock at a discount.
Shopify, the star of the pandemic, is gradually losing its shine, as investors book profits. The shares surged to sky-high valuations, as they saw 10-year growth in a year. All the stimulus money, which inflated tech stocks, is now disappearing, creating a tech downturn. Shopify faced the music, with the stock falling 22% since Christmas. The stock surged 21% in 2021 after rising 169% in 2020.
The question is, will the stock end the year 2022 in the green? Shopify was in an uptrend in 2019, but the significant surge in 2020 disturbed the smooth line and created volatility. The e-commerce trend is here to stay, and Shopify still enjoys 46% revenue growth in the third quarter, which is slow compared to more than 95% growth it witnessed in 2020. The stock price has hit a ceiling and is likely to hover in the $1,300-$2,200 range. The stock is currently trading closer to the lower range, which makes it a good buy. You can buy the stock now and sell it at a price above $1,900, which is 37% upside.
Descartes Systems shares fell 12% towards the new year countdown, as Omicron-induced lockdown once again impacted some of its customers. The stock surged 33% in 2020 on the back of the e-commerce wave. It surged 40% in 2021 as pent-up demand from economic recovery created a supply chain crisis worldwide. This crisis would likely continue in 2022, creating an opportunity for Descartes Systems to provide supply chain solutions.
I am bullish on Descartes and expect it to surge another 30% this year. Now is a good time to buy this stock at a discounted price.