The drop in tech stocks seems unstoppable for now. After rate-hike fears did the damage and brought a bitter start to the year, Meta’s weaker-than-expected earnings weighed on tech names. While many high-growth TSX stocks are trading at approximately 30-50% discount, very few of them offer attractive reward prospects. Here are three of them.
Shopify
Canadian tech giant Shopify (TSX:SHOP)(NYSE:SHOP) held the crown almost throughout the pandemic, as the country’s biggest company by market cap. However, the recent drop has been so brutal that it has lost approximately 50% value in the last three months. Every time the stock has shown some recovery recently, it has seen an equally dominant pullback.
Increasing interest rates and concerns over Shopify Fulfillment Network pulled the stock lower of late. However, I think it has suffered enough and should bottom out soon.
Shopify’s fulfillment network is expected to be the next major growth driver. The network takes care of the order delivery to the customer along with managing inventory levels and customer data. The company clarified last week that it would not reduce its network capacity, as some feared. We will have more details on the issue when the company reports its Q4 earnings in the next few weeks.
SHOP stock is currently trading close to its 18-month lows. It is trading 30 times its earnings, far discounted against its average historical valuation from the valuation perspective. I think it’s a great bargain at these levels, as it could see a sharp recovery ahead of its Q4 earnings.
Nuvei
Just like Shopify, Canadian fintech stock Nuvei (TSX:NVEI)(NASDAQ:NVEI) has also been unable to leave behind the weakness. It has been digging deeper since last September. Driven by rising interest rate fears, a short attack, and valuation concerns, NVEI stock has dropped 60% since its 52-week high.
Many conservative investors would hold back after such a steep value erosion. However, the company has kept its growth outlook intact amid all these daunting events.
The payment-processing company Nuvei will likely see its geographical presence and merchant base expanding in the next few years. Its integrated payment platform stands out among peers and caters to a wide array of clients. This includes cryptocurrency platforms, sports betting companies, and e-commerce.
Notably, after this big drop, the downside risk in NVEI stock looks limited. Bulls could come fast at this growth name, given its handsome earnings growth prospects and relatively cheaper valuation.
Constellation Software
Constellation Software (TSX:CSU) stock has been relatively better placed amid the recent tech stock rout. It has fallen a mere 12% from its 52-week high in December 2021.
And that’s mainly because of its differentiated, not-so-jazzy business model. It operates a fleet of small- or medium-sized software companies that caters to private and public sector clients. Driven by successful acquisitions and consistent profitability, CSU stock has been a solid wealth creator, returning approximately 3,000% in the last decade.
The recent drop, though comparatively small, could be an attractive opportunity for growth as well as value investors. The stock could emerge strongly, as the sentiment around tech stocks improves in the near future.
