High inflation, rising interest rates, and an uncertain economic trajectory led investors to dump growth stocks. Given the selling, shares of several top Canadian companies are trading at a value far less than they were a year ago.
While near-term macro headwinds could continue to restrict the recovery in growth stocks, investors with long-term horizons could start buying the dip to profit from the recovery in their prices. Let’s look at a few beaten-down stocks you’ll be happy to own and hold for the next decade. I have zeroed in on companies with a proven business model and strong fundamentals that enhance their chances of recovery. Let’s begin.
Shopify
Tech stocks lost substantial value amid the recent selling in the market. Thus, it makes sense to buy a few stocks from this sector. Among tech stocks, Shopify (TSX: SHOP)(NYSE:SHOP) is a must-have at current levels. Let’s look at factors that make Shopify a solid investment to beat the broader markets by a wide margin.
Notably, Shopify stock has dropped over 72% in one year. This significant correction in Shopify stock is due to a slowdown in its growth amid tough year-over-year comparisons. Further, an economic reopening and macro headwinds weighed on Shopify stock.
Undeniably Shopify’s growth has decelerated significantly from the pandemic highs. However, this was expected given the pull-forward demand. Further, with this significant decline, the negatives appear to be priced in the stock.
Looking ahead, Shopify faces easy comparisons, which should support its growth. Further, it is likely to benefit from its investments in growth initiatives. Notably, Shopify continues to aggressively invest in POS (point of sale) and e-commerce infrastructure, including fulfillment. Also, it is partnering with social media companies to add more sales and marketing channels. All these measures will likely drive its merchant base and support its gross merchandise volume. Also, its expansion into new geographies, benefits from the Deliverr acquisition, and growing adoption of capital and payments offering bode well for growth.
With multiple growth vectors, the structural shift towards omnichannel selling platforms, and its low valuation (it is trading at a multi-year low), Shopify is an attractive long-term investment.
Nuvei
Like Shopify, shares of the payment tech company Nuvei (TSX: NVEI)(NASDAQ: NVEI) have lost substantial value, dropping nearly 63% in one year. A short report from Spruce Point and overall selling in the high-growth stocks are to blame for this price erosion.
Further, Nuvei’s management warned that the headwinds from adverse currency movement, lower volume in digital assets and cryptocurrencies, and an uncertain economic environment could hurt its near-term prospects.
Despite concerns, Nuvei’s management reiterated the medium-term revenue and volume growth outlook. Nuvei’s management expects a 30% annual increase in its volume and revenues in the medium term, which is positive and should support its stock recovery.
It continues to invest in sales and distribution, which should drive its customer base. Further, the expansion of its alternative payment methods, focus on cross-selling and upselling at a limited incremental cost, and entry into high-growth verticals and geographies augur well for growth. Also, opportunistic acquisitions and product expansion will likely accelerate its growth.
Overall, the pullback in its price and multiple growth vectors make Nuvei an attractive investment at current levels.
