This year has brought with it hopes of a recovery, especially in the tech space, as the economy revives. Fueling this hope is the expectation of interest rate cuts by the Bank of Canada from its decade-high rate of 5%. Technology stocks took a hit in 2022 when the news of the interest rate hike floated. As news of a reverse trend floats in 2024, investment in tech will likely pick up and drive tech stocks.
Three tech stocks to buy hand over fist in January
I have identified three tech stocks that took a hit and are yet to recover to normalcy.
Dye & Durham
Legal practice management software provider Dye & Durham’s (TSX:DND) stock has slipped 72% since December 31, 2021, for various reasons. First, its significant exposure to real estate clients reduced its revenue as high interest rates pulled down housing prices. Second, its two failed acquisitions of TM and Link impacted its earnings. Third, Dye & Durham’s debt ballooned as it funded acquisitions with debt. And lastly, many companies reduced their tech budget amid business uncertainty, reducing Dye & Durham’s revenue and operating margin.
All these trends are set to reverse when interest rates fall. DND is now focusing on reducing its debt. It has increased the fixed interest rate debt to 41% of its total debt from 24%. Moreover, it is buying back its convertible debentures to reduce the dilution of equity shares. As the economic environment improves and the real estate sector gains momentum, demand for DND software could surge because of the sticky nature of its Unity platform.
While the current earnings might look weak, the company is moving in the right direction to improve efficiency and profits. Once its efforts start materializing into earnings, DND stock could surge. The stock has gained 48% since November 2023 to over $12. It could return to its all-time high of $46 and above as the company moves towards its long-term target of $1 billion in adjusted operating profit.
Nuvei stock
Payments platform Nuvei’s (TSX:NVEI) stock slipped more than 80% from its all-time high of $171 in September 2021. Nuvei also has high debt on its balance sheet, because of which its financing cost soared, and the company reported a net loss. But it is not looking to repay its debt. Instead, it is focused on increasing its business-to-business revenue by targeting enterprises. The company’s medium-term target is to maintain 15-20% revenue growth and a 50% adjusted operating margin.
Such growth figures are achievable as digital payments volume picks up. Growing business certainty and e-commerce momentum could drive Nuvei stock to its 2021 high in a few years.
Hive stock
Blockchain technology and cloud service provider Hive Digital Technologies (TSXV:HIVE) stock has fallen 44% since December 27, 2023. This stock is highly volatile as its price is influenced by Bitcoin prices, which depend on investor sentiments and economic health. Recovery in the macroeconomic situation and investor optimism could drive Hive stock up as it did in December 2023, when it surged 80% to over $7.50.
Hive is a stock you can actively trade within its price range of $4-$8. It is a stock you can buy near $4 and sell once the price crosses $7. As the stock price is low, you can easily buy 100 shares for $400-$450 and convert your $3 profit per share into $300. If the stock falls below $4, it has the potential to recover as it has Bitcoin inventory. Bitcoin is called the digital gold of crypto as it has thrived after two crypto bubble bursts.
Investor takeaway
The above stocks have what it takes to give a tech stock rally of double-digit growth within months. However, remember that growth stocks are volatile, and the above three stocks could see a pullback before a rally. Stay focused on the recovery rally. Invest only the amount you are willing to lose.
