Technology stocks have been under pressure over the last few weeks amid concerns over sticky inflation. Last week, the U.S. Labor Department announced that the consumer price index rose 3.7% in September year over year, higher than analysts’ expectation of 3.6%. With inflation remaining on the higher side, the Federal Reserve expects to continue with its restrictive monetary policy until inflation falls to its guidance of 2%.
The fear that these restrictive monetary policies could hurt global growth and cause recession has led to a sell-off in technology stocks lately. However, the steep pullback has created excellent buying opportunities for long-term investors in the following three stocks.
WELL Health Technologies
WELL Health Technologies (TSX: WELL) is a tech-enabled healthcare company that allows practitioners to offer their patients omnichannel services. Amid the weakness, the company has lost over 16% of its stock value since September. Despite the correction, the company is trading 39% higher this year. Meanwhile, given the company’s healthy growth prospects, I believe the pullback offers an excellent entry point for long-term investors.
Earlier this month, the company acquired HEALWELL AI’s clinical assets in Ontario and has strategically partnered with it to develop AI-enabled tools and technologies for care providers. Under this partnership, they have launched WELL AI Decision Support, which would help healthcare providers in early diagnosis and preventive health. Further, the growing adoption of telehealthcare services has created multi-year growth potential. Meanwhile, the company’s expansion across North America and launching of new innovative product offerings could support its financial growth in the coming years.
Given its healthy growth prospects and an attractive NTM (next 12 months) price-to-earnings multiple of 12, I am bullish on WELL Health Technologies.
Docebo
Docebo (TSX: DCBO) is another technology stock that I am bullish on. Despite falling over 7% since the beginning of September, the company still trades 22.3% higher for this year. In August, it posted a solid second-quarter performance, with its revenue growing by 25%. The net addition of 485 customers over the previous four quarters and an increase in the average contract value from $44,495 to $48,148 drove its sales.
Amid the top-line growth, its adjusted net income improved to $4.7 million compared to an adjusted net loss of $0.7 million in the previous year’s quarter. Besides, it generated an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) and free cash flows of $3.1 million and $7 million, respectively.
Meanwhile, the e-learning market is expanding amid increased adoption. With the signing of several blue-chip clients, the acquisition of Edugo and Peerboard, and new innovative tools, Docebo is well-equipped to drive its financials in the upcoming quarters. Given its discounted stock price and healthy growth prospects, I expect Docebo to outperform over the next three years.
Shopify
My final pick would be Shopify (TSX: SHOP). The company, which offers essential internet infrastructure for businesses, has lost around 20% of its stock value since August 31. Despite the recent pullback, the learning solutions provider has delivered over 53% of returns this year. Meanwhile, the company continues to deliver strong performance, with its revenue growing by 31%. Its adjusted operating income stood at $146 million or 9% of its revenue, compared to a loss of $42 million in the previous year’s quarter.
Meanwhile, the company is introducing AI (artificial intelligence) enabled features across its platforms, which could aid its customers in improving their productivity and making smarter decisions. With online shopping still growing, I expect Shopify to be well-positioned to benefit from this expansion. Considering all these factors, I believe Shopify will deliver superior returns over the next three years.
