The tech sector as a whole hasn’t been on sale for a relatively long time. The year 2023 has especially been good for the sector, and the TSX Capped IT Index rose by about 30% this year alone. But not all tech sector constituents have experienced the same bull market phase. Many have spent the year slumping, and this includes two of the relatively new members of the Canadian tech sector.
A customer experience and digital solutions company
Telus International (TSX:TIXT) has the default benefit of a known and trusted name — i.e., Telus, one of the largest telecom companies in Canada. The company represents the telecom giant’s attitude towards operational diversification, and while not as big, Telus International has already established a powerful presence in the tech market.
It operates in over 30 countries and specializes in Customer Experience (CX) solutions/services, though its solution portfolio is quite comprehensive. It offers a range of IT lifecycle solutions, digital experience solutions, and multiple artificial intelligence/data solutions.
The company’s finances are in great shape as well, and the revenues have grown consistently over the last three years. The stock, however, has taken the opposite turn.
It has lost over half its market value this year alone, and the downward pattern continues. The price target predictions from market experts are not in favour of the stock, and if the sector goes bearish, it may worsen the current state of this stock.
However, that doesn’t take away the long-term potential of this stock, and buying it now when it’s so heavily discounted (and moderately valued) may enhance the return potential once the stock finally starts recovering.
A cloud solutions company
Softchoice (TSX:SFTC) is an old company but a relatively new stock. It has only been around since 2021 and has lost 31% of its value since its inception. The stock fell roughly 20% this year alone. Although it’s quite overvalued even in its discounted state, the finances of the company don’t seem to be the chief instigator of its current downfall.
The revenues have been going up at a modest pace on a yearly basis, and the net income has improved a great deal. The only major problem in the company’s current finances is the amount of debt it carries, which is significant for a small-cap tech company.
The company offers a wide range of cloud-related solutions, which are relevant even in today’s market when the bulk of businesses have already migrated to the cloud or have reoriented themselves with a cloud-first strategy.
It also offers a range of services, including IT management and cybersecurity services. It has strong industry relationships as well. The stock may not be an attractive buy today, but it’s also not an unsafe buy.
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Foolish takeaway
The two tech stocks might prove to be powerful picks in the long run, especially if they are bought at a discounted rate. However, simply buying at a discount might not be the ideal situation. You should try buying them at the cusp of their long-term bullish phase followed by a recovery, but it will be difficult to predict that starting point.
