2 Potentially Explosive Stocks to Buy in February

There are some potentially explosive moments coming in the near future as earnings come out, and these two tech stocks are right on my radar.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published February 1, 2024 8:30 pm EST

Earnings season continues to be upon us, with the beginning of February marking a few top stocks investors may want to look out for on the TSX today. The thing is, I’m staying away from companies like the Magnificent Seven. Instead, look to these companies that could see another quarter of strength and continue to rise higher for some quick cash in February.

Considerations

While attention continues to be placed on the larger tech stocks, there are small-cap tech stocks that analysts believe investors could be missing out on. Software spending trends for 2024 have already been climbing, and there seem to be positive views on fintech and payments as well.

What investors will want to look for are companies with a strong history of growth, as well as with conservative approaches to earnings. There are a few here, but ones in the cloud revenue space, as well as payments, look to be among the best options.

Consumer spending continues to climb, with consumer goods seeing a large addition to gross domestic product (GDP) in December. So, as we continue to see this trend, here are two stocks that could explode.

OpenText

OpenText (TSX: OTEX) is a top choice among analysts ahead of earnings. The company continues to show a strong operating profile, with about 80% of revenue being recurring and holding a 35% adjusted earnings before interest, depreciation and amortization (EBITDA) margins.

Add in strong free cash flow (FCF), and the tech stock looks like it could easily use its enterprise software to grow further. Specifically, this was declared in the artificial intelligence (AI) space during its OpenText World event last year. Furthermore, it’s sold off non-core assets to strengthen its bottom line for even more growth in the future.

While analysts expect earnings to be in line with estimates, this could turn even more positive in the coming year. What investors should really look out for are full-year updates, which are likely to be conservatively positive. This could be the largest driver of share growth in the near term.

Lightspeed

Another company continuing to show strength as well as value is Lightspeed Commerce (TSX: LSPD). The e-commerce and point-of-sale stock offers short- and long-term opportunities for investors — especially as it continues to increase the use of its Unified Payments.

While 2024 looks like it will see improvements, it’s 2025 that investors should really see the stock price surge higher. In fact, analysts believe that full-year 2025 gross payments estimates should more than double, especially if it catches up to its other peers.

This should be relatively easy to achieve, with the company merely bringing its current large clients onto its payments platform. The goal is for 50% in the next two years, with 25% already on board. For now, analysts and investors alike love that Lightspeed continues to focus on profitability, which it achieved during the last quarter. Therefore, the stock continues to be a strong option as consumers return to normal spending, especially in the retail and hospitality sectors.

So, while shares remain at $25, where they’ve been for months, that could change after earnings come out on Feb. 8. Therefore, make sure to keep this tech stock on your radar as well.