Anyone who’s been invested in the tech sector since the early days of the pandemic is certainly no stranger to volatility by now. After a market-wide selloff in early 2020, growth stocks, particularly in the tech sector, came roaring back. The growth continued right through most of 2021. Since then, tech stocks have struggled to rebound. Today, there is no shortage of tech stocks on the TSX that continue to trade below all-time highs from late 2021.
When you zoom out and look at the tech sector’s performance as a whole since early 2020, you can certainly argue that the recent pullback is not all that surprising. There was a massive amount of growth pulled forward in 2020 and 2021. The selloff throughout 2022 has to be at least partly blamed on the sudden surge in the two years prior.
Is now the time to be buying tech stocks?
The good news for tech investors is that 2023 has shown much more promise than what we saw last year. Plenty of tech stocks continue to trade below all-time highs, but at least many of those are positive on the year, hinting that they may have bottomed out in 2022.
With that in mind, now could be a very opportunistic time to load up on tech stocks. However, short-term investors may want to proceed with caution. With as much volatility as we’ve seen as of late, it’s anybody’s guess as to how the year will end for the tech sector.
Those with a long-term time horizon, however, should have their watch list locked and loaded. There are too many good deals to pass up on the TSX right now.
As long as you’re willing to be patient and not panic-sell during inevitable market periods, I’ve reviewed a discounted tech stock that should be on your radar.
Shopify
It’s hard to fathom the price activity that Canada’s largest tech stock has endured since early 2020. Looking at the total return on the five-year chart, nothing seems all that unordinary for Shopify (TSX:SHOP). Shares are up a whopping 300% since late 2018, which is not that uncommon for a high-growth company like this one.
Today, shares of Shopify are down nearly 70% from all-time highs that were set in late 2021. That’s even with the stock up a market-crushing 40% year to date.
Similar to many of its tech peers recently, Shopify was not able to avoid making significant employee lay-offs. But with the smaller headcount, management remains extremely bullish on the company’s long-term outlook. The company firmly believes that it will be able to increase profitability while simultaneously continuing to drive monster revenue growth numbers. In other words, the stock’s erratic price activity is by no means a reflection of the health of the business.
Foolish bottom line
Investing in high-growth tech stocks is not always for the faint of heart. Volatility is often on the higher end of the investing spectrum. As a result, I’d strongly argue that having a long-term time horizon is a prerequisite for owning companies like Shopify.
We may not see Shopify trading at a discount like this for a long time. If you’ve got the cash and are willing to be patient, this is not a bargain you’ll want to miss.
