With the sharp pullback in TSX tech stocks, now is an opportunity to buy high-quality names at prices significantly below their highs. Though the uncertainty and economic slowdown could continue to play spoilsport, several TSX tech stocks are well-positioned to outperform the broader market index and deliver stellar returns.
So, for investors planning to buy the dip in tech stocks, here are my three picks with all the ingredients to generate market-beating returns.
Shopify
Shopify (TSX: SHOP)(NYSE:SHOP) stock has been a top wealth creator and destroyer. It delivered multi-fold returns and made its investors very rich. However, due to the recent selling, it reversed a significant portion of its gains and eroded investors’ wealth.
The slowdown in e-commerce growth amid economic reopening and pull forward demand amid the pandemic led to a sharp decline in Shopify stock, which has lost over 80% of its value from its peak.
However, this decline is a solid buying opportunity. Shopify is well positioned to bounce back steeply as e-commerce demand revives. Moreover, Shopify is expected to benefit from its investments in growth initiatives, which have begun to gain traction.
Shopify’s investments in POS and fulfillment, expansion of products in new markets, the addition of new merchant solutions, and partnerships with leading companies augur well for long-term growth. Meanwhile, the growing penetration of Shopify Capital and Payments, strategic acquisitions, and secular tailwinds will likely support its growth.
Lightspeed
Shares of Lightspeed (TSX: LSPD)(NYSE: LSPD) have plunged nearly 85% from the 52-week high. This decline comes despite its continued strong financial performances and solid organic growth. With the ongoing momentum in its business and shares at a multi-year low, Lightspeed stock has a high probability of generating significantly higher returns than the benchmark index over the next decade.
Lightspeed benefits from solid organic sales and its strategic acquisitions. Its management remains upbeat and expects to deliver solid organic sales growth in the coming years. The growing penetration of its payments solutions and increase in gross transaction volumes provide a multi-year growth opportunity for the company.
Furthermore, its investments to add more merchant solutions, focus on increasing its penetration into the existing verticals, expansion into new verticals and markets, and cross-selling and upselling opportunities will likely support its organic growth. Further, its focus on selective acquisitions, product development, and a large addressable market are positives.
Nuvei
Nuvei (TSX: NVEI)(NASDAQ: NVEI) stock lost significant value due to concerns over the slowdown in its growth amid a weakening macro environment. However, these concerns haven’t played out yet. Nuvei consistently delivers strong growth, and management expects the momentum to sustain.
It’s worth mentioning that Nuvei’s management expects its revenues to increase by over 30% per annum in the medium term. This growth guidance appears conservative given the momentum in Nuvei’s business.
Nuvei continues to invest in sales and has a diversified network of distribution partners. Moreover, the expansion of alternative payment methods bodes well for growth. These measures are expected to drive its customer base and support growth. Further, the expansion of its digital assets, land-and-expand strategy, entry into emerging markets, and opportunistic acquisitions provide a solid long-term growth platform.
