Like all exchanges worldwide, it’s been a tough year for the TSX. But are there green shoots emerging?
One sector that has been hit particularly hard is technology. But this week, analysts at various banks said they are bullish on a number of stocks. We single out three such opportunities.
Lightspeed Commerce (Lightspeed Commerce Stock Quote, Charts, News, Analysts, Financials NYSE:LSPD), is one such candidate. According to Industrial Allaince Capital Markets analyst Neehal Upadhyaya, who delivered an update to clients on the company on Wednesday. The analyst said Lightspeed has a number of growth levers at its disposal.
Montreal-based Lightspeed held its capital markets day on Tuesday, where the company focused on its journey so far, touted its revamped commerce platform and, importantly, its goal going forward of attracting the right customer, namely, larger clients with higher gross transaction volumes.
Upadhyaya said Lightspeed management expressed how 46 per cent of its customer base represents just five per cent of GMV, or the total dollar value of transactions processed through LSPD’s platforms. Lightspeed has come around to the belief that its tech stack is best geared toward the more complex workflows (multiple store locations, many employees) associated with larger clients.
Upadhyaya said this shift is aimed at increasing Lightspeed’s average revenue per user substantially.
“Considering the backdrop of troubling macroeconomic conditions the world over, this shift in focus will help protect the downside of subscription revenues due to less churn, while allowing LSPD to win big for every high GTV customer it onboards to its payments solution,” Upadhyaya wrote.
With the update this week, Upadhyaya reiterated a “Buy” rating on LSPD and US$27.00 target price target, which at the time of publication represented a projected one-year return of 55.8 per cent.
Another Canadian tech stock, Real Matters (Real Matters Stock Quote, Charts, News, Analysts, Financials TSX:REAL) delivered a couple of misses with its latest quarterly results this week. But ATB Capital Markets analyst Martin Toner is holding the line on the stock for the moment, reporting on the company’s fiscal fourth quarter results in a flash update to clients on Wednesday.
Real Matters is a Toronto-based software and services platform for the mortgage lending and insurance industries.
Reviewing the results, Toner pointed to the topline of $58.2 million, which was under the consensus estimate at $71.7 million, while the EBITDA loss of $1.1 million and adjusted EPS of $0.00 were also lower than the expected positive $0.5 million and $0.01 per share respectively.
By segment, Toner noted that the company’s US Appraisal business was down 51.7 per cent year-over-year, while US Title was down a full 81.7 per cent, as REAL continues to deal with mortgage volumes at decreasing levels. The company’s Canadian market also declined by 19.8 per cent to $10.3 million.
“According to the Company, US total mortgage origination volumes were down roughly 42 per cent from FY21, driven by a 61 per cent decline in refinance mortgage origination volumes,” Toner wrote.
“Despite the decline in revenues, net revenue margin beat, and the Company continues to limit losses, which we believe will limit the investor reaction to the miss,” he said.
With the update, Toner reiterated an “Outperform” rating on REAL and an C$8.00 target price, which at press time represented a projected one-year return of 90.0 per cent.
Finally, the third quarter results from Canadian real estate consulting services company Altus Group (Altus Group Stock Quote, Charts, News, Analysts, Financials TSX:AIF) were mixed according to National Bank Financial analyst Richard Tse. But the growth prospects for Altus are strong enough for him to keep an “Outperform” rating on the stock, with the analyst advising investors to look beyond the less-than-stellar headline numbers.
Altus Group, which has real estate software applications and data solutions for evaluating property assets and works in Canada, the US, the United Kingdom and Asia Pacific, posted its Q3 financials on November 10, featuring consolidated revenues up 17 per cent year-over-year to $177.7 million and adjusted EBITDA up 34.8 per cent to $32.9 million. Revenue from its Altus Analytics (AA), the company’s technology segment, was up 35 per cent to $87.6 million, while CRE Consulting revenues were up four per cent to $90.3 million.
Tse said Altus’ Q3 topline at $177.7 million was under both his estimate at $183.8 million and the consensus at $183.3 million, while EBITD at $32.9 was essentially in-line compared to his forecast at $33.8 million and the Street at $31.9 million.
Digging deeper, though, Tse noted the strong performance from AA, which he said is building momentum and the segment’s key performance indicators looked good. He pointed to AA’s revenue which was up 27.7 per cent organically, and cloud adoption, which now hit 55 per cent of Altus’ user base for a 300 bps sequential improvement.
“Bottom line, we believe Altus continues to make progress on expanding its addressable market and growth opportunity for Altus Analytics, executing on what we call the ‘3Ps’, being Process, Products and People,” Tse wrote.
“While the Company’s operating actions have driven continued gains in AA, we see a lot more potential looking ahead given an expanding portfolio of products using a delivery model that should drive higher attach / renewal rates on an increasingly growing recurring revenue base,” he said.
Looking ahead, Tse expects Altus to generate full 2022 revenue and adjusted EBITDA of $733.0 million and $136.5 million, respectively, and 2023 revenue and EBITDA of $772.3 million and $142.1 million, respectively.
Along with his maintained “Outperform” rating, Tse reiterated a 12-month target of $60.00, which implied a return of 20.9 per cent at the time of publication.