2022 has been harsh on growth stocks. Fear of an economic slowdown amid high inflation and interest rates dragged them lower. While the macro environment hasn’t changed much, several top TSX stocks are trading at a significant discount, providing an opportunity to buy and hold them for decades to create massive wealth. Against this backdrop, let’s look at stocks that are down about 45-75% this year but have solid growth prospects in the long term.
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A top e-commerce company
With a year-to-date decline of approximately 74%, Shopify (TSX:SHOP) is a must-own stock for long-term investors near the current levels. The normalization in demand trends, a slowdown in growth rate, macro challenges, and tough year-over-year comparisons have weighed on the shares of this e-commerce company. Furthermore, investors’ negative outlook on tech stocks (due to their high valuation and lack of profitability) remained a drag.
While Shopify stock has lost significant value, its strong fundamentals and secular sector trends indicate that the company will deliver solid returns in the long term. It has invested heavily in its e-commerce infrastructure, including fulfillment and payment offerings. These investments will likely drive the adoption of its POS (point-of-sale) offerings and help it capitalize on the ongoing shift in selling models towards omnichannel platforms.
Shopify has also partnered with leading social media companies. With these partnerships, Shopify has expanded its selling and marketing platforms, which is likely to drive its merchant base. Moreover, the expansion of its products in new geographies and growing e-commerce penetration will likely accelerate its growth and support its stock price.
A commerce-enabling company
Lightspeed (TSX:LSPD) provides a cloud-based commerce-enabling platform focusing on small- and medium-sized corporations. Its stock has corrected over 64% and is trading cheap (its next 12-month enterprise value-to-sales multiple of 1.4 is at an all-time low), presenting a good buying opportunity.
The increased spending from retailers and restaurateurs on technological advancements and modernization of their legacy POS platform bodes well for growth. Moreover, Lightspeed’s focus on integrating its brands into one and selling only two core products is expected to enhance its go-to-market approach, reduce costs, and support margins. Moreover, the company is prioritizing customers with high gross transaction value. This is expected to reduce its churn rate and drive average revenue per user.
Overall, Lightspeed’s low valuation and strong growth profile position its well to deliver stellar returns in the long term.
An e-learning platform provider
Down over 48%, shares of the e-learning platform provider Docebo (TSX:DCBO) are an attractive long-term investment. The company’s fundamentals remain strong, and it is acquiring enterprise customers fast. What stands out is the ongoing strength in its ARR (annual recurring revenues) and other operating metrics, despite the tough macro environment.
Its ARR has a CAGR (compound annual growth rate) of 66% since 2016. Meanwhile, the momentum has sustained in its ARR in 2022. Further, Docebo is also benefitting from its growing customer base and increase in average contract value.
Looking ahead, its focus on product expansion, increased revenues from existing customers, and strategic acquisitions will likely fuel growth and support the uptrend in its stock.
