In the last 23 years, investors have wrestled with several economic downturns, such as the dot-com bubble, the financial crisis, the COVID-19 pandemic, and the most recent period of quantitative tightening measures.
Despite these macro headwinds, indices such as the S&P 500 and TSX 60 have delivered inflation-beating returns to shareholders. Historically, equities as an asset class have generated significant wealth to patient investors over time.
Yes, the stock market is expected to remain volatile in the near term due to geopolitical tensions, interest rate hikes, a slowdown in corporate earnings, and sluggish consumer spending. But every single bear market in the past has been eventually replaced by a multi-year bull run, allowing investors to derive market-beating gains once market sentiment improves.
So, here are two quality tech stocks to buy right now before the next bull market begins.
Snowflake stock
Valued at a market cap of US$56.5 billion, Snowflake (NYSE: SNOW) is among the fastest-growing tech stocks globally. In the fiscal second quarter (Q2) (ended in July), Snowflake increased its customer count to 8,537, indicating a growth rate of 25% compared to the year-ago period. Despite a sluggish macro environment, customers increased spending on the Snowflake platform by 42% in the last 12 months.
A widening customer base and higher spending allowed Snowflake to increase revenue by 37% to US$640 million in fiscal Q2. Its adjusted net income rose more than 16 times to US$81 million.
Snowflake provides a cloud-based data platform to enterprises to manage workloads across verticals. Moreover, its data-sharing tools make the company uniquely positioned to enable artificial intelligence-powered workloads.
Priced at 21 times forward sales, Snowflake trades at a hefty premium. But Morgan Stanley forecasts its revenue to grow by 31% annually in the next five years, while earnings growth is forecast at more than 65% in this period.
Analysts remain bullish and expect SNOW stock to gain over 15% in the next 12 months.
Lightspeed Commerce stock
Down over 85% from all-time highs, Lightspeed Commerce (TSX: LSPD) should be part of your watchlist in 2024. Valued at $3.5 billion by market cap, Lightspeed provides cloud-based software subscriptions and payment solutions to small and medium businesses such as retailers and restaurants.
In Q2 of fiscal 2024 (ended in September), Lightspeed’s sales grew by 25% to $230.3 million. Its gross payment volume on the LSPD platform grew 59% to $5.9 billion, while gross transaction volume surged over $23.5 billion.
Moreover, the fintech company reported a positive adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) for the first time ever in the September quarter.
Lightspeed emphasized just 25% of total GMV uses Lightspeed payments, and this number could surpass 50% in the next 18 months, driving profit margins significantly higher.
Analysts expect LSPD to improve its earnings to $0.48 per share in fiscal 2025, compared to a loss of $0.22 per share in 2023.
So, the TSX tech stock trades at 47 times forward earnings, which is not too high if it can improve the bottom line at a consistent pace. Analysts expect LSPD stock to surge around 20% in the next 12 months.
