Tech stocks have been coming out with earnings in the last two weeks, with some seeing pretty significant drops. While two made headlines, there’s also another that I want investors to consider. In fact, I want investors to consider whether the market got it wrong in the first place.
Shopify stock
Shopify (TSX: SHOP) has made a huge comeback in the last year, making massive cuts and focusing back on its e-commerce platform for merchants. It’s now back to profitability and seeing enormous growth. And yet, investors weren’t on board with Shopify stock after earnings this week.
Shopify stock reported earnings at US$0.34 per share, with revenue rising 24% to US$2.1 billion. Furthermore, this beat out earnings estimates of US$0.30 per share and US$2.07 billion in revenue. So, why the fall? The company provided lower 2024 guidance than many had hoped. The company believes it will reach revenue in the low-twenties percentage rate year over year.
This also beat earnings estimates. But after seeing a year of insane results, it seems that investors wanted more. As for me? I was quite happy with earnings and very happy with stable profitability from its logistics business sale. Growth is growth, and stability added on there is even better. So, I would certainly reconsider Shopify stock.
Lightspeed stock
Another tech stock I believe the market got wrong was Lightspeed Commerce (TSX: LSPD). Lightspeed stock may have risen to profitability, marking success with its Unified Payments in the last year. And yet, shares have remained around $24 or lower in the last year.
During the company’s earnings report, Lightspeed stock reported revenue up 27%. Furthermore, the tech stock saw its Unified Payments use by clients increase to 29% from 24% just the quarter before. With the goal of 50% in the next two years, this looks like it’s well on the way to achieving the goal.
And yet, shares for the tech stock dropped as the company remained uncertain about macroeconomic issues and posted a net loss. Despite being profitable in terms of adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), the loss comes down to acquisitions coming online.
Yet overall, Lightspeed stock’s drop looks far overdone. What’s more, with Unified Payments in place, the company will then turn back to subscription increases, including prices, perhaps. All this means the company is in line to create more growth through 2024 and really accelerate through 2025.
OpenText stock
Finally, OpenText (TSX: OTEX) is another Canadian tech stock that saw shares drop after earnings. OpenText stock reported record total revenue of US$1.535 billion, up 71% year over year. Annual recurring revenue also climbed by 58% to US$1.146 billion, with record quarterly enterprise cloud bookings as well.
The company was also able to add cash to its books, selling off the application modernization and connectivity unit of its Micro Focus acquisition. This brought in US$2.275 billion for OpenText stock. It’s allowed the stock to use that money to pay off debt and provide more flexibility, perhaps even adding buybacks in the future.
Investors eyeing up the stock should then look beyond just this year and consider the next three years. This will be when its artificial intelligence vectors will be up and running — vectors already bringing in more bookings. And as the tech stock expands in the United States, it simply looks undervalued today.
