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Amidst macroeconomic challenges such as rising interest rates, lower enterprise spending, and inflation, the technology sector experienced a remarkable bull run in 2023. With expectations of multiple interest rate cuts in 2024, the tech stock rally is anticipated to persist. Here are two TSX technology stocks poised to outperform the TSX index in 2024:
1. Docebo (TSX:DCBO)
With a market cap of $2 billion, Docebo stock exhibited impressive performance, surging 43% in 2023 and marking a 300% increase since its IPO. Operating as a learning management software company, Docebo provides an AI-powered learning platform across North America, Europe, and other international markets. The company's learning management system (LMS) caters to internal and external workforces, partners, and customers.
Docebo's strategic focus on innovation is evident in the introduction of nearly 90 new features and capabilities in the last three quarters, enhancing customer engagement and retention. In Q3 2023, Docebo reported a revenue of US$46.5 million, representing a 26% YoY increase. The company's expanding customer base, with 3,679 customers in Q3, and rising annual contract value underscore its growth momentum.
With free cash flows of US$8.4 million and a margin of 18%, Docebo exhibits improved profitability. Priced at 84 times forward earnings, the stock trades at a discount of nearly 25% to consensus price target estimates, presenting an attractive opportunity for investors.
2. Snowflake (NYSE:SNOW)
Boasting a market cap of US$65 billion, Snowflake is a leading provider of an enterprise-facing cloud-based data platform with a strong presence in the U.S. and international markets. As enterprises increasingly transition data and workloads to cloud-native platforms, Snowflake is positioned to benefit from this secular demand trend. The company's data cloud enables customers to consolidate data, extract meaningful business insights, and develop data-driven applications.
In the fiscal third quarter of 2024, Snowflake demonstrated its growth trajectory by adding 35 new customers with annual spending exceeding US$1 million, bringing the total to 436 customers with similar annual spending, marking a 52% YoY increase. Snowflake's hypergrowth is reflected in its financials, with a net revenue retention rate of 135% and consistent profits. Analysts forecast significant sales growth from US$2.1 billion in fiscal 2023 to US$3.63 billion in fiscal 2025.
Trading at 176 times forward earnings, Snowflake stock, while relatively expensive, is considered a quality growth stock with a 10% discount to consensus price target estimates.
In summary, Snowflake and Docebo, with their robust fundamentals and growth prospects, emerge as promising technology stocks set to outperform the TSX index in 2024. As the tech sector continues to evolve, these stocks position investors to capitalize on the anticipated momentum and capitalize on the growth potential.
