The tech sector in Canada is full of discounted stocks right now, ranging from modestly cheap to aggressively discounted. Even though the sector (as a whole) has started moving upwards, the index is still down 33% from its 2021 peak. If the bullish trend continues long enough, you may lose the opportunity to buy good tech companies at a discounted price.
One problem with sector-wide deals is identifying the right discounted stocks to buy. Each investor may have their favourites or stocks that fit well with their growth projections, but there are two tech stocks that almost all investors should look into.
An e-commerce stock
Lightspeed Commerce (TSX:LSPD) is one of Canada’s two major e-commerce stocks. The company focuses on small– to medium-sized businesses in three domains – retail, restaurants, and golf. It started as a point-of-sales (POS) company but now offers its clients a wide range of cloud-based solutions.
The stock had a great run from its inception to the 2021 peak, but since then, it has fallen so aggressively that it’s now trading at just 8.7% more than the price it listed for in 2019. The size of the discount is just as massive, 87% from its last peak.
This decline cannot simply be chalked up to the tech sector correction. A short-selling firm published a report that contained discrepancies in Lightspeed’s claims and reports, which exacerbated the stock’s situation.
However, in its current form, the LSPD stock looks quite attractive. The company has been growing its revenue at a decent pace, and its reach hasn’t dwindled yet. It has minimal debt and a significant amount of cash and investments at its disposal, which may allow it to fund its organic growth in the near future. One problem with the stock is that it hasn’t followed the positive momentum of the sector so far.
However, the chances of it recovering in the long term might be decent enough if you buy now. If the stock reaches its post-pandemic peak, you may be able to grow your capital by 7x (at least). This is enough incentive to hold this tech stock for the long term.
A digital health technology company
Telehealth, or the overlap of healthcare and technology, is not a new concept, but it garnered a lot of attention during the coronavirus outbreak. The world realized the importance of digital healthcare delivery, and companies like Well Health Technologies (TSX:WELL) benefitted from the attention. The stock rose over 550% in less than a year, but then it all came crashing down.
The stock’s decline wasn’t as sharp as its ascent, and it took the company almost two years to lose about 70% of its value. But it has started to turn things around. The stock has already risen over 56% in 2023 (so far), and it may keep rising at this pace for a while. It’s still quite cheap, at half price compared to its 2021 peak. So if you buy now, you may get to double your capital if the stock makes a full recovery.
Foolish takeaway
Not all cheap and discounted tech stocks are poised for as powerful a recovery as these two companies. The two companies might be worth holding beyond the short-term recovery/bullish trend you might be considering buying them for. The long-term gains could be even more significant.
