Easing inflation could moderate the pace of the Central Bank’s interest rate hike, implying it’s finally the time to buy Canadian tech stocks. Notably, tech stocks lost their sheen amid rising interest rates and valuation concerns. Thus, an improvement in the macro environment could lead to a recovery in tech stocks that have lost substantial value this year.
So, if you plan to invest in tech stocks and capitalize on the recovery in their prices, here are my three top picks with the potential to deliver multi-fold returns in the medium to long term. But before I discuss the companies, let’s be clear that tech stocks are highly volatile and carry higher risks. Thus, investors with a high-risk appetite and long-term outlook should invest in tech stocks. With that in the background, let’s begin.
Shopify
Shopify (TSX: SHOP) was among the top TSX stocks by market cap before investors turned their backs on high-growth companies. Moreover, a slowdown in its growth rate and fear of a recession further weighed on its stock price. While Shopify stock has corrected significantly, it bounced back from the lows, reflecting the moderation in inflation from its peak.
Further, Shopify now faces easier year-over-year comparisons in the coming quarters, supporting its growth. Also, Shopify’s investments in sales and marketing and other growth initiatives have started to gain ground, implying its growth rate could reaccelerate and support the recovery in its stock price.
Shopify’s financials will get a boost from the increased adoption of its POS (point of sale) and Capital offerings. Meanwhile, the ongoing shift towards omnichannel platforms, expansion of its existing products in new markets, addition of new features, and partnerships with social media companies bode well for growth and will likely drive its merchant base.
Docebo
Docebo (TSX: DCBO) is an attractive stock to play the recovery in the technology stocks. Notably, shares of this corporate e-learning platform provider are trading at a considerable discount, despite its consistent financial performance and strong growth. Moreover, its operating metrics remain solid, implying an improvement in the macro environment could give a significant boost to its stock price.
Docebo’s annual recurring revenues are growing rapidly and marked a 40% growth in the third quarter (Q3). Further, the company benefits from the increase in its customer base, despite macro concerns. Also, increased revenues from its customers at lower incremental costs and an increase in average contract value support its growth.
The company is also expected to gain from new product launches and accretive acquisitions. Moreover, productivity savings augur well for growth.
Kinaxis
Despite macro concerns, the demand for Kinaxis’s (TSX: KXS) cloud-based supply chain management and business planning software remains high. The company’s annual recurring revenues are growing at a decent pace (increased by 25% in Q3), reflecting new customer wins (Kinaxis’s customer count increased by about 35% year over year in 2021).
Besides the expansion of its customer base, strong backlog, incremental bookings, and high renewal rates are positives. Given the momentum in its business, the company raised its full-year revenue and margin outlook. Moreover, it is poised to benefit from the increase in enterprise spending, as the economy improves.
