The first half of 2022 wiped out billions from the market cap of top Canadian companies. Among all the sectors, tech stocks were sold the most. However, this indicates that now is the opportunity to invest in fundamentally strong tech stocks that could outperform the broader markets in the long term. Here are my top recommendations.
Docebo
I find Docebo (TSX: DCBO)(NASDAQ: DCBO) stock attractive at current levels, and there are good reasons for that. The company offers an AI-based corporate e-learning product suite and has been growing rapidly, despite tough comparisons and economic reopening. While demand for Docebo’s offerings sustains, its stock has fallen by 64% from the 52-week high due to the sector-wide valuation compression amid concerns of an economic slowdown.
Despite tough year-over-year comparisons, Docebo continues to grow its annual recurring revenue at a healthy pace. Further, it continues to win new customers, while its average contract value has consistently increased. Moreover, a growing list of customers opting for multi-year contracts and a high retention rate augurs well for growth.
All in all, Docebo’s strong subscription revenues, a growing list of enterprise customer base, new product launches, land & expand strategy, and a large addressable market provide a multi-year foundation for solid growth. Also, its focus on opportunistic acquisitions and geographic expansion will likely accelerate its growth rate.
Shopify
The moderation in growth due to the difficult year-over-year comparisons led to a sharp pullback in Shopify (TSX: SHOP)(NYSE:SHOP) stock. It has dropped about 74% in the last six months, creating an opportunity for investors to invest in this high-growth company for the long term.
The uncertain economic trajectory and tough comparisons could keep Shopify stock range-bound in the short term. However, its investments in e-commerce platform, strengthening of the fulfillment network, and ongoing shift in selling models towards omnichannel platforms will lead to a steep recovery in its stock price.
Shopify’s new commercial initiatives, focus on expanding its existing products into new geographies, the addition of sales and marketing channels, growing adoption of its payments offerings, and increased penetration of e-commerce as a percentage of overall retail bodes well for growth.
Due to the recent pullback, Shopify stock is priced at the next 12-month EV/sales multiple of 6.8, which is at a multi-year low, providing a solid investment opportunity.
Nuvei
Payment tech company Nuvei (TSX: NVEI)(NASDAQ: NVEI) lost substantial value after Spruce Point came out with a short report. Further, general selling in the stock market led to a further decline in Nuvei stock. Regardless of the concerns raised in the short report, Nuvei’s management remains confident of achieving at least 30% volume and revenue growth in the medium term, which is encouraging.
Given the ongoing digital shift and higher penetration of e-commerce, the demand for Nuvei’s offerings could remain high. Moreover, customer wins, the addition of new alternative payment methods, entry into high-growth avenues like social gaming and e-commerce, and land-and-expand strategy will likely drive its financials and stock price.
It’s worth mentioning that Nuvei stock has corrected 65% from its 52-week high and is trading at a low forward EV/sales multiple, which presents a solid entry point for long-term investors.
