Valuation concerns, normalization in growth, and macroeconomic headwinds led investors to dump tech stocks. However, this selling has created an investment opportunity, especially in top-quality tech stocks that are reasonably priced at current levels. Let’s look at three such fundamentally strong stocks, which have lost a considerable portion of their value and are attractive long-term investments.
Shopify
While Shopify (TSX: SHOP)(NYSE:SHOP) stock has rebounded from its lows, it is still down over 51% this year. Amid all the factors, a slowdown in growth and expensive valuation are two top reasons why investors offloaded Shopify stock. Notably, tough year-over-year comparisons and reopening of retail locations are likely to impact Shopify’s growth.
While Shopify’s growth could stay below 2021 levels (achieved 57% revenue growth in 2022), it could still increase at a healthy pace. Further, its growth will likely accelerate in the second half of 2022.
The structural shift towards digital commerce, Shopify’s growing market share, and expansion of its product suite could continue to support its growth. Also, its ability to get more merchants on its platform, expansion of payments solutions, and investments in fulfillment and commerce infrastructure provide a solid foundation for long-term growth.
While Shopify has multiple growth catalysts, its stock is trading at an EV/sales multiple of 13, a three-year low. Overall, Shopify’s strong business model, strong growth potential, and low valuation make it a solid investment at current levels.
Docebo
Docebo (TSX: DCBO)(NASDAQ: DCBO) stock has dropped over 44% from its high. Further, it is down about 24% this year. While shares of this corporate e-learning platform provider have lost considerable value, it continues to deliver stellar financial performance, which supports my bullish outlook.
The COVID-19 pandemic accelerated Docebo’s growth. Further, its high growth has sustained even after the economic reopening. Its key performance indicators, or KPIs, including annual recurring revenue, customer base, average order value, and retention rate, continue to impress. For instance, Docebo’s annual recurring revenue increased by 59.1% in 2021. Further, its customer base and average contract value improved by 28.7% and 23.5%, respectively. Also, its net dollar retention rate remained high at 113%.
The momentum in Docebo’s business is likely to sustain due to higher enterprise spending. Also, its solid KPIs, large addressable market, multi-year contracts, operating leverage, and acquisitions bode well for growth.
WELL Health
The COVID-led acceleration supported WELL Health Technologies (TSX: WELL) stock. However, economic reopening and fear of a slowdown in growth took a toll on it, wiping out a significant portion of its value.
Nevertheless, WELL Health continues to deliver robust sales and positive adjusted EBITDA, which is encouraging. Its revenues increased by 573% in Q4. Further, adjusted EBITDA jumped 324%. Looking ahead, WELL Health projects strong revenue growth in 2022. Moreover, it expects to deliver profitable growth, which is encouraging.
The ongoing momentum in its organic revenue, benefits from acquisitions, strength in the U.S. business, and higher omnichannel patient visits bode well for growth. Further, an extensive network of outpatient medical clinics and diversified offerings will likely support its growth.
