Technology investors are staring right down the barrel this year. After enjoying more than a decade of outsized gains, the steep valuations of tech stocks coupled with a challenging macro environment have dragged shares prices significantly lower in the first nine months of 2022.
But investors should understand that a bear market lasts for an average of 289 days. Further, every bear market is eventually replaced by a bull market where equities reclaim record highs.
So, when investor sentiment improves, tech stocks should regain their lost glory and trend higher in the future. Let’s take a look at two such TSX tech stocks you can consider buying right now.
A fintech giant
One of the worst-performing stocks on the TSX, Lightspeed Commerce (TSX:LSPD)(NYSE:LSPD) stock is down 85% from all-time highs. However, the point-of-sale (POS) and e-commerce software provider continues to grow revenue at a healthy pace.
Lightspeed has increased sales from US$77.5 million in fiscal 2019 to US$548.3 million in fiscal 2022 (ended in March). In fiscal Q1 of 2023, Lightspeed grew sales by 50% year over year to US$174 million. Its subscription revenue rose 47% to US$74 million, while transaction-based revenue was up 62% at US$100 million.
Comparatively, Bay Street forecast Q1 sales at US$168 million. Lightspeed also reported an adjusted net loss of US$17.6 million or US$0.12 per share in the June quarter.
The fintech company projected fiscal 2023 sales between US$740 million and US$760 million, an increase of 37% year over year. So, LSPD stock is valued at four times forward sales, which is reasonable for a company growing at a healthy pace.
But Lightspeed has to improve its profit margins to regain investor confidence. Analysts forecast its adjusted earnings to improve to US$0.02 per share in fiscal 2024, compared to a loss of US$0.48 per share reported in fiscal 2022.
Analysts tracking LSPD stock expect shares to more than double in the next 12 months.
An e-commerce heavyweight
Valued at its peak in November 2021, Shopify (TSX:SHOP)(NYSE:SHOP) was once the largest company on the TSX in terms of market cap. Now Shopify stock is down 82% from record highs and is trading at a market cap of US$36.5 billion.
Shopify enables small merchants to set up online storefronts while providing them with a range of other services, such as payment processing, shipping, and digital marketing, among others. The company has onboarded over two million merchants, and it is now the second-largest online retailer in the U.S., with a gross merchandise volume of US$175 billion in 2021, an increase of 47% year over year.
While the COVID-19 pandemic acted as a massive tailwind for Shopify, its top line is expected to decelerate in 2022, though Wall Street expects sales to rise by 21.7% year over year. But as it continues to invest heavily in the Shopify Fulfillment Center, profit margins are expected to decline significantly.
In 2022, analysts expect Shopify to report a net loss of $0.15 per share, compared to earnings of $0.84 per share in 2021.
Shopify is part of the rapidly expanding addressable e-commerce market, which makes it a top long-term bet. SHOP stock is trading at a discount of 180% to consensus price target estimates.
