In 2023, several TSX tech stocks experienced a rebound after underperforming in the previous year. Despite economic uncertainties and challenges related to spending constraints, the tech sector is set to benefit from the ongoing digital shift. The expected stabilization of interest rates and overall economic improvement further contribute to the positive outlook for tech stocks that have rebounded this year.
Two Canadian tech stocks with high growth potential on the TSX are Shopify (TSX: SHOP) and Lightspeed (TSX: LSPD).
Shopify (TSX: SHOP):
Shopify is positioned as a must-own Canadian tech stock for wealth creation, being a leading e-commerce platform provider. The company has shown resilience in its revenues and sustained growth even at a large scale. Shopify's stock has witnessed a notable year-to-date rally of nearly 112%, reflecting its strong performance.
The company's innovative products and expansion of sales and marketing channels indicate the potential for continued growth in its merchant base and transaction volumes. Shopify's cost reduction initiatives and focus on an asset-light model are expected to support margins and generate sustainable earnings. The durability of its revenue, strong gross merchandise volumes, and a positive outlook on the attach rate contribute to the overall optimism surrounding Shopify's growth prospects.
Lightspeed (TSX: LSPD):
Lightspeed is highlighted as a top tech stock to buy on the TSX, combining solid growth with an attractive valuation. The company offers a cloud-based commerce platform catering to small- and medium-sized businesses, particularly in the hospitality and retail sectors. Lightspeed's solutions, including Lightspeed Restaurant and Lightspeed Retail, position it favorably to benefit from the ongoing shift towards multi-channel commerce platforms.
Lightspeed's revamped go-to-market strategy aims at streamlining operations and targeting high gross transaction value (GTV) customers, leading to sustainable earnings growth. The company has seen a 9% increase in customers with over $1 million in GTV during the second quarter of fiscal 2024. Strategic acquisitions are expected to drive customer locations, accelerate product development, and enhance competitive positioning.
Despite its growth potential, Lightspeed's stock is trading at a discounted valuation, with a forward enterprise value/sales multiple of 1.8, considerably lower than its historical average. This, combined with its online and offline offerings, positions Lightspeed to benefit from increased spending on tech advancements by retailers and restaurant operators.
In summary, both Shopify and Lightspeed present compelling investment opportunities on the TSX, with Shopify's strong performance and Lightspeed's growth potential and discounted valuation contributing to their attractiveness.