After touching all-time highs in 2021, shares of several Canadian tech stocks grossly underperformed the broader markets in the last 15 months. Investors were worried about the steep valuations surrounding technology stocks, in addition to a difficult macro environment, dragging share prices significantly lower.
For instance, Shopify (TSX:SHOP) stock is down 71% from all-time highs, while Lightspeed (TSX:LSPD) stock has pulled back 88% compared to record highs. While the equity market is expected to remain volatile in the near term, a bull market is inevitable. The time is ripe to go bottom-fishing and buy TSX stocks at a discount. So, let’s see which beaten-down tech stock is a better buy between Shopify and Lightspeed in April 2023.
The bull case for Shopify stock
A leading e-commerce platform in North America, Shopify enables businesses to create and manage digital stores. The company has onboarded over two million merchants seeking its solutions, including web design, inventory management, and payment processing onto its platform.
Shopify’s sales have surged over 400% in the last four years as the COVID-19 pandemic acted as a massive tailwind for e-commerce companies. However, its top-line growth is now decelerating as Bay Street expects Shopify to end 2023 with revenue of $9 billion, an increase of 18.4% year over year.
Shopify accounted for 10% of total online sales in the U.S. in 2022, making it the second-largest e-commerce platform after Amazon. Moreover, online retail sales are forecast to grow more than 13% annually through 2030. So, Shopify has enough room to expand its sales over time.
The bull case for Lightspeed stock
A company operating in the fintech space, Lightspeed Commerce offers a SaaS (software-as-a-service) platform for businesses primarily operating in the restaurant and retail verticals. This platform allows Lightspeed’s customers to accept payments and simplify operations using capabilities such as inventory management.
Customers use its suite of products aiming to reduce costs, automate operations, and leverage data-driven insights. Over the years, Lightspeed Commerce has focused on highly accretive acquisitions to drive sales higher from US$120.6 million in fiscal 2020 (ended in March) to US$693 million in the last 12 months. Analysts now expect Lightspeed Commerce to end fiscal 2023 with sales of US$733 million.
In the December quarter, Lightspeed grew sales by 24% year over year to US$188.7 million as gross payments volume surged 75% to US$3.9 billion. The number of customer locations processing over US$500,000 annually increased by 15% year over year.
While still unprofitable, Lightspeed expects to end fiscal 2024 with breakeven adjusted EBITDA (earnings before interest, tax, depreciation, and amortization).
The Foolish takeaway
Both Shopify and Lightspeed continue to trade at a premium. Shopify stock is valued at 8.7 times forward sales, while this metric is lower for Lightspeed at 3 times. Whereas Shopify is forecast to report adjusted earnings of $0.04 per share in 2023, Lightspeed is estimated to end fiscal 2023 with a loss of $0.27 per share.
In terms of analyst estimates, Shopify stock is trading at a discount of 30%. The upside potential for Lightspeed stock is much higher at 80%. However, I believe Shopify’s wider economic moat and expanding e-commerce presence make it a better stock to own in April 2023.
