The TSX has gone through multiple cycles of dips and hikes in the last 12 months. In some cases, the dips and recoveries were influenced by a sector; in others, it influenced the movement of different sectors.
The last six months have been amazing for the tech sector, which has grown by about 35%. As for the energy sector, the pattern has been the opposite. It has mostly remained stagnant and fallen by about 4.3% over the last six months.
Despite this powerful recovery, the tech sector has yet to go a long way to reach its 2021 peak, and if it keeps riding the current momentum for two or three years, it may easily reach that point or go beyond it.
In doing so, the sector might catapult some of the most beaten-down stocks to almost double their current valuation (or higher) in the next three years.
A payment technology company
One of the tech stocks poised for this growth is Nuvei (TSX: NVEI), the payment technology company that’s still trading at a 67% discount to its 2021 peak. Nuvei is a payment technology company and a key player in the e-commerce industry. Safe and trusted payments are a key part of any functioning e-commerce system, and Nuvei provides these solutions to a variety of companies.
It has already developed a compelling portfolio of clients from various industries. The stock may be new, but the company is old enough, and, over the years, it has made a lot of acquisitions to fuel its growth and expand its geographic reach.
Now, it operates in 200 different global markets and deals with around 150 currencies, including a healthy selection of cryptocurrencies, making it an ideal fit for tomorrow’s digital economy. The company has developed over 600 alternative payments to date.
The stock
The stock currently trades at a heavy discount and is heavily overpriced. That’s not a healthy combination, but the stock has shown that it can leverage the sector’s bullish momentum.
In the last six months, the stock rose by about 41%, which is quite similar to the sector’s recovery. But if the ultimate destination is the 2021 peak, and we assume that Nuvei stock will reach that mark in the next three years, it can more than double your capital. If you buy it at its current price and it reaches its peak, you may grow your capital by a factor of three.
A strong point in the company’s favour is its steady financials and minimal debt compared to its cash reserves. If the company makes a significant acquisition or reaches an organic growth milestone while simultaneously benefitting from the sector’s recovery, it may have no trouble doubling or going beyond this size in the next three years.
Foolish takeaway
The tech sector’s bear market may finally be over, but there is a strong possibility that the sector might falter a few times before fully recovering. It’s on the right track now, and a boost in e-commerce activity may also push its recovery ahead of the sector.
