Tech stocks south of the border are feeling the heat as investors are worried about the possibility of a U.S. recession amid rising unemployment rates and slower consumer spending. However, the pullback allows investors to buy the dip and add quality stocks to their equity portfolio in August 2024.
Here are two top tech stocks you can buy as the Nasdaq enters correction territory.
Shopify stock
Shares of Shopify (TSX:SHOP) surged over 17% after the company reported its second-quarter (Q2) results, valuing the company at US$82.44 billion by market cap. Despite the pullback, Shopify stock is down almost 60% from all-time highs.
In the June quarter, Shopify reported revenue of US$2.05 billion and adjusted earnings per share of US$0.26. Comparatively, analysts forecast revenue of US$2.01 billion and earnings of US$0.20 per share in Q2.
Shopify helps businesses set up and build an online presence. It also offers ancillary solutions, such as payment processing and digital marketing, to help digital businesses run their operations efficiently. Shopify’s gross merchandise volume, or GMV, rose 22% to US$67.2 billion, topping estimates of US$65.8 billion. The GMV is the total volume of merchandise sold on Shopify’s platform.
Shopify’s asset-light model and its focus on lowering costs amid a challenging macro environment has allowed the company to report a free cash flow of US$333 million in Q2, indicating a margin of 16%. In the year-ago quarter, its free cash flow stood at US$143 million. Shopify’s free cash flow has increased to US$1.08 billion in the last four quarters, up from US$578.5 million in 2023. Priced at 76 times trailing FCF might seem steep, but Shopify has almost doubled this metric in the past year.
A widening cash flow base provides Shopify with the flexibility to repay debt and target acquisitions, both of which could drive future cash flows higher. Moreover, Shopify’s monthly recurring revenue rose by 25% to US$169 million, indicating an annual run rate of over US$2 billion.
Analysts tracking SHOP stock remain bullish and expect it to gain close to 70% in the next 12 months.
CrowdStrike stock
Among the hottest tech stocks in the world, CrowdStrike (NASDAQ:CRWD) is down 40% from all-time highs as it was at the epicentre of a major IT outage last month, which impacted over eight million devices, costing millions of dollars to companies globally. Several companies may now sue CrowdStrike for the outage, which is expected to weigh on its cash flows in the next 12 months.
However, the cybersecurity giant’s business fundamentals remain solid, given that it increased sales by 33% year over year to US$3.65 billion in fiscal Q1 of 2025 (which ended in April). CrowdStrike’s cloud-based Falcon platform continues to gain traction and will be a key driver of revenue growth in the upcoming decade.
In the last four quarters, CrowdStrike’s free cash flow has risen to US$1.14 billion, up from just US$52 million in fiscal 2019. Priced at 58 times forward earnings, CRWD stock still trades at an elevated multiple. However, Wall Street expects the tech stock to surge over 60% in the next 12 months.
