After crashing last year, most Canadian tech stocks have seen a spectacular recovery in 2023. In fact, the tech sector has outperformed all other main TSX sectors, such as industrials and consumer cyclicals, this year by a wide margin. With this, shares of many popular tech companies are currently trading with solid double-digit year-to-date gains, while the TSX Composite benchmark has risen only by 4%.
But is it really the right time to buy tech stocks? Let’s discuss that before I highlight a cheap tech stock that I find worth considering in July 2023.
Why tech stocks crashed in 2022
Before understanding what’s next for Canadian tech stocks, we must take a look at what triggered a tech sector-wide selloff last year. At the start of 2022, consistently high inflationary pressures made investors afraid that the central banks in the United States and Canada would be forced to take aggressive monetary policy actions.
These concerns, coupled with the gradually subsiding coronavirus-driven demand for digital products, badly hurt tech investors’ sentiments, leading to a crash in tech stocks. By the middle of 2022, growing geopolitical tensions after the Russian invasion of Ukraine worsened the global economic environment further, making more investors flee risky assets, including tech stocks.
Is it the right time to buy Canadian tech stocks?
While macroeconomic challenges continue to haunt investors even in 2023, some early signs of easing inflationary pressures and the growing possibility that the central banks might soon pause interest rate hikes have led to a recent rally in tech stocks.
In addition, some recently launched generative AI (artificial intelligence) tools have led to increased buying pressure in tech sectors in recent months. While Canadian tech stocks have already seen an outstanding rally this year so far, we shouldn’t forget that most of them are still far below their pre-pandemic year’s closing level. Given that, it still might not be too late to buy cheap tech stocks in July 2023, as they can deliver solid returns on investments, especially if you hold them for the long term.
A cheap TSX tech stock to buy in July 2023
Based on its year-to-date performance and fundamental outlook, Lightspeed Commerce (TSX:LSPD) could be a great Canadian tech stock that I find cheap now. This Montréal-headquartered, one-stop commerce platform provider currently has a market cap of $3.4 billion, as its stock trades at $22.41 per share with about 16% year-to-date gains.
It’s important to note that despite its recent recovery, LSPD stock price is still more than 75% lower than its 2019’s closing level of $89.84 per share. Notably, a big selloff in Lightspeed’s shares started towards the end of 2019 when a New York-based short-seller, Spruce Point Capital, made several vague accusations about the Canadian tech firm and its management.
While Spruce Point’s accusations hardly made any major changes in Street analysts’ opinion about Lightspeed stock, they seemingly affected retail investors’ sentiments, leading to a crash. Nonetheless, the fact remains that LSPD’s business growth still looks promising in 2023. In its fiscal year 2023 (ended in March 2023), the tech company posted 33.2% positive year-over-year growth in its top line, despite facing inflationary pressures and other macroeconomic challenges.
Moreover, Lightspeed’s continued efforts to expand its geographical presence and customer base could help it reach sustainable profitability soon, which should help this Canadian tech stock rally.
