Missed out on big tech stocks like the Magnificent Seven? Canadian tech names like Shopify and Lightspeed may be your second chance. Canada’s tech picks are digital titans tied to digital commerce that can offer investors strong growth which can last decades.
Here’s a look at two big tech stocks for investors to consider.
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Shopify: Powering e-commerce
Shopify (TSX: SHOP) is a name known to most investors. The company operates a platform that lets businesses build an online presence across multiple channels in a fraction of the time that traditional methods require.
Shopify generates revenue from subscription fees and transaction-level fees when merchants process sales on the platform. The business model is tied directly to the long-term growth of e-commerce.
Shopify also allows customers to bolt on additional functionality depending on their needs. This includes everything from social media and marketing to order fulfillment, support, and product definition.
In other words, Shopify is a complete platform for any online business, and it continues to evolve.
For investors, the opportunity in Shopify rests on its massive and still-growing merchant base. The more merchants that join its network, the more Shopify can spread its fixed costs out over a larger base.
This, in turn, leads to higher profit margins and further growth investment.
Investors who think they missed out on big tech stocks have to take into consideration whether that growth will continue. If it does, as many believe, then Shopify will continue to see strong growth.
That potential furthers the case for investing in Shopify at this juncture. Despite posting a solid gain of 46% year-to-date, in the past month, the stock is trading down over 7%.
Lightspeed: Modern tools for real-world merchants
Lightspeed Commerce (TSX: LSPD) offers cloud-based point-of-sale and commerce software for businesses. Its platform helps merchants handle ordering, checkout, inventory, scheduling, and more across multiple channels. The company also sells rated hardware terminals and scanners.
In short, Lightspeed is the digital hub replacement for old cash-register systems. And that puts the company in a unique position somewhere between software and payments.
That’s key because as more small and mid-size businesses modernize their systems, they will turn to the solutions that Lightspeed offers. And that will lead to higher revenue numbers and significant growth.
It’s also worth noting that Lightspeed is still at the earlier stage of its profitability journey, especially when compared to Shopify’s more than a decade-long journey. While this makes Lightspeed a higher-risk option, it also means that there’s more growth upside over the long term.
That risk is evident in the stock’s 28% slide year-to-date.
In some ways, Lightspeed’s current dip is comparable to the challenges that Shopify faced over a decade ago. More specifically, headline losses that are reported are masking the heavy investment being made in growth.
This means that prospective investors should see Lightspeed in terms of the longer-term opportunity it poses, rather than the shorter-term losses it’s incurring.
Big Tech Stocks and that second chance
Prospective investors who feel that they missed the big boost to tech names need to remember that the markets move in cycles.
Shopify and Lightspeed have already experienced these boom-and-bust cycles, meaning they sometimes trade at far more reasonable multiples than at their prior peaks, even while their underlying businesses continue to add customers and build products.
In my opinion, a small position in one or both would be a great option for any well-diversified portfolio.
