Canadian investors may be wondering if it’s a good idea to go after the many artificial intelligence (AI) stocks that got crushed during last week’s terrifying stock market selloff. Indeed, a market correction always tends to be scary when it happens, even if we tell ourselves it is more of an opportunity to snag shares of great companies at slightly better prices.
Indeed, it can feel as though stocks can only move lower after a few bad losing streaks in the market! And though it can seem smartest to just wait things out, perhaps until there are either even lower prices of admission or less in the way of negative momentum, doing such could make you miss out on some of the market’s best bounce-back days!
Indeed, August saw a return of the recession jitters. With the Bank of Canada already slashing interest rates (more cuts likely to come!), it seems like many folks have already assumed that we’re in for a no-landing type of economic landing, something that was a tad too optimistic back in 2022 when we were all so convinced there were a rough patch for the economy and a particular ugly recession.
Indeed, the 2022 market plunge unfolded more than a year. Yet, no recession came, and stocks eventually gained ground again, eventually blasting off to hit new all-time highs. Though a recession can’t be ruled out, I think that investors shouldn’t time the economy. Instead, focusing on great growth companies at reduced prices can make the most sense.
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AI innovation won’t go on pause, even if a recession does hit!
Remember, innovation, especially AI innovation, can advance by leaps and bounds, even if the market were to be held back by a year or more by a recession. Further, I’d argue that some of the smaller, lesser-known mid-cap AI innovators stand to benefit as economic jitters incentivize the Bank of Canada (and the U.S. Fed south of the border) to cut rates at a faster cadence.
In this piece, we’ll check in with one lesser-known TSX AI stock that could make for a great buy on weakness. Though nobody knows when stocks will move on from the recent summer slip, I view the following growth play as attractively valued with one of the more underrated AI-driven growth narratives today.
Docebo: AI innovation at a discount?
Docebo (TSX:DCBO) is a $1.27 billion mid-cap technology firm that’s in the business of learning management systems (LMS). The stock blasted off more than 14% on Thursday’s bounce-back trading session, thanks in part to a fantastic quarter.
Despite the single-day surge, DCBO stock is still down 53% from its all-time high hit back in 2021. As the company looks to double down on AI-powered learning with virtual coaching and other intriguing AI-enhanced offerings (think search and personalization), it’s time to treat Docebo like the AI-leveraging innovator it is. I think the strong quarterly showing could be just the start of a nice rally toward 52-week highs close to $55 per share.
Though a bit pricey at 40.1 times forward price to earnings, I view Docebo as one of the under-the-radar AI beneficiaries to keep watch of as more workforces embrace the platform.
