ATB Capital Markets analyst Martin Toner delivered a report to clients on Sunday where he reviewed some of his picks in the Growth & Innovation space and singled out three Canadian tech stocks with “Outperform” ratings.
It’s been a good stretch in the new year for growth and tech stocks, with the past week adding to the strong start to 2023. The Nasdaq Composite averaged a return of 4.0 per cent last week and is up 11.9 per cent so far in January.
Toner said seven of the ten stocks in his G&I coverage were up last week. On economic indicators, Toner noted that US GDP data showed the economy growing by 2.9 per cent sequentially, which was higher than the 2.6 per cent expected, while personal consumption grew by 2.1 per cent, indicating a slowdown in consumer demand.
Employment turbulence in the tech sector continues to be in the news, with Toner pointing to Microsoft, Alphabet, Spotify and IBM, which recently laid off five per cent, six per cent, six per cent and two per cent of their respective work forces.
“January has seen the highest number of layoffs since the beginning of the pandemic. The 68,402 layoffs have eclipsed the previous high of 52,370 seen in November 2022. The 227 layoff events also represented a new high,” Toner said.
As earnings season kicks off once again, Toner noted results from Blackline Safety (Blackline Safety Stock Quote, Charts, News, Analysts, Financials TSX:BLN) and Real Matters (Real Matters Stock Quote, Charts, News, Analysts, Financials TSX:REAL), saying that Blackline’s fourth quarter revenue came in below consensus estimates while its adjusted EBITDA was better than expected. For Real Matters, its fiscal first quarter 2022 was a miss on both the top and bottom lines as the company continues to deal with a downturn in the mortgage market.
Toner noted that fiscal third quarter 2023 earnings are due on Thursday, February 2, from Montreal-based e-commerce platform Lightspeed Commerce (Lightspeed Commerce Stock Quote, Charts, News, Analysts, Financials TSX:LSPD), with the analyst saying that despite inflationary pressures on discretionary spending, both the retail and hospitality sectors have held up pretty well, while Payments has been a strong growth area for Lightspeed.
For LSPD’s fiscal Q3, Toner is forecasting revenue of $185 million and an adjusted EBITDA loss of $8.2 million.
“We believe the combination of the restructuring and the sunsetting of legacy platforms following the release of One Lightspeed will help move the Company towards its stated goal of achieving breakeven profitability in FY2024,” Toner wrote.
Stock: Blackline Safety
ATB Capital rating: Outperform
ATB Target price: $3.50
Projected 12-month return: 38.3 per cent
Stock: Real Matters
ATB Capital rating: Outperform
ATB Target price: $8.00
Projected 12-month return: 63.9 per cent
Stock: Lightspeed Commerce
ATB Capital rating: Outperform
ATB Target price: $60.00
Projected 12-month return: 145.5 per cent
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