When a stock experiences a steep decline it’s safe to assume that the company has wrestled with poor execution, thereby impacting its performance. But the last few years have seen a variety of tech stocks post astronomical gains and are now hurt by steep valuations resulting in a market-wide sell-off.
Let’s take a look at two growth stocks Canadians can buy at depressed prices that should allow them to outpace the equity market in 2022.
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Shopify
Shopify (TSX: SHOP)(NYSE:SHOP) is a Canadian tech giant valued at a market cap of $144 billion. It’s down almost 50% from all-time highs and should be on the shopping list of contrarian and growth investors.
Shopify operates in the e-commerce space and provides tools for small businesses, enabling them to create and maintain an online presence. It also provides a host of other services that include payment processing, shipping, and fulfillment. In fact, Shopify is investing heavily in expanding its fulfillment network allowing it to compete with big-box chains.
In Q3 of 2021, Shopify increased sales by 46% year over year which was lower than its top-line growth of 86% in 2020. Analysts now expect sales to rise by 56% to $4.6 billion in 2021 and another 33% to $6.1 billion in 2022.
Similar to most other growth stocks, Shopify will sacrifice growth for profitability. In 2021, Wall Street expects EBITDA to rise by 65% to $800 million in 2021 and by another 4% to $833 million this year. So, its EBITDA margin will decline to 13.7% in 2022 from 17.5% in 2021.
Despite the pullback in SHOP stock, it trades at a forward price-to-earnings multiple of 105, which is sky-high. But as it’s impossible to time the market, every dip should be viewed as a buying opportunity.
Considering price target estimates, Shopify stock could rise over 100% in the next 12 months.
Green Thumb Industries
While Shopify is still overvalued, shares of Green Thumb Industries (CNSX: GTII) are attractively priced. Green Thumb is trading at a market cap of $5.2 billion and is forecast to report sales of $1.13 billion in 2021 and $1.45 billion in 2022, compared to just $557 million in 2020. Its adjusted earnings might also grow to $0.65 per share in 2022, up from $0.07 per share in 2020.
So, GTII stock is valued at a price to 2022 sales multiple of 3.6 and a price-to-earnings multiple of 28, which is really cheap.
The cannabis giant has 73 operating dispensaries with licenses to expand the store count to 114 across 15 U.S. states. Green Thumb increased Q3 sales by 49% year over year to $233.7 million and reported a fifth consecutive profitable quarter. Its net income in Q3 doubled to $20.8 million, up from $9 million in the year-ago period.
Green Thumb opened 15 stores in 2021 and has established a presence in its home state of Illinois, where recreational cannabis sales surged over $1.3 billion in 2020.
Analysts expect GTII’s stock price to increase by 150% in the next 12-months.
