The e-commerce market has been growing at a steady pace. COVID expedited this pace of growth astronomically for a while, and when the pandemic slowed down, e-commerce experienced a contraction. But now that things are back to the pre-pandemic normal, e-commerce is back on track.
The Canadian e-commerce stocks haven’t followed this pattern quite accurately, but they did experience a recovery that ranged from modest to aggressive (based on the stock) in the last few months. The bullish momentum is not as strong at the time of writing, but if the bear market phase of e-commerce stocks in Canada is over, you may consider looking into them for long-term recovery.
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The Canadian e-commerce giant
When we think of e-commerce in Canada, the first name that comes to most minds is Shopify (TSX: SHOP). Shopify emerged as one of the top e-commerce companies in the world that helped businesses establish an online presence and start leveraging the e-commerce market.
It also became one of the most powerful growth stocks in the TSX history. Unfortunately, the company no longer holds that status.
The post-pandemic correction was quite brutal for the stock, and even after its recent recovery, which pushed its value up by about 95% in less than a year, the stock is still trading at a 65% discount from its 2021 peak. But its other numbers look promising.
The stock is still overvalued, but the situation is not as dire as it was before when the stock was near its all-time high.
The debt is a mere fraction of its current cash holdings and small investments. But there is one chink in its financial armour: the operating loss it incurred in 2022, despite decent revenue growth in the year. But if you wait for operating income to enter the green territory, you may lose a compelling recovery opportunity.
A point-of-sale company
Lightspeed Commerce (TSX: LSPD) has established itself as a leader in the point-of-sale (POS) business, but right now, that’s just a relatively small segment of its full portfolio. The company is currently offering a wide range of e-commerce services that can be rolled into its POS services to make transactions transparent and easy for most small businesses.
Lightspeed stock was expected to become the next Shopify, and it did experience compelling growth during the pandemic, but a number of factors resulted in a drastic fall, and it’s still trading at an 87% discount from its 2021 peak. The factors stemmed from more than just the e-commerce’s downfall in Canada. A short-seller report specifically targeting Lightspeed compounded the damage.
Financially, the company is in better shape than Shopify. The net income is still negative, but the gap is shrinking.
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Foolish takeaway
The two tech stocks are in different places on their recovery journey, and if both of them are destined to reach the peak they fell from, Lightspeed will be a much better pick than Shopify. This is based simply on the enormous returns it can offer you if it fully recovers. A more realistic outlook would be a shaky, bullish phase for both companies that may extend several years into the future.
