The best Canadian tech stocks (July, 2023)

ATB Capital Markets analyst Martin Toner recently delivered a Growth & Innovation sector report to clients, with a number of updates on Canadian technology stocks, including Shopify (Shopify Stock Quote, Charts, News, Analysts, Financials TSX:SHOP) and Kinaxis (Kinaxis Stock Quote, Charts, News, Analysts, Financials TSX:KXS).

It’s been a great first half of the year for growth and innovation stocks, the best performance in 40 years, according to Toner. G&I stocks closed out the Q2 with a 5.1 per cent increase last week, while the tech-heavy Nasdaq Composite was up 2.4 per cent last week and is now up 33 per cent year-to-date.

Toner commented on Shopify, which released a number of company updates recently, including the unveiling of its Collabs Network for merchants who want to connect with content creators to help acquire customers and the launch of the Shopify Ventures website, which for the first time lists the 25 investments made by the e-commerce giant in private companies, in areas such as fintech, marketing tech, global commerce and commerce infrastructure.

On the Collabs Network, Toner said in his June 2 report, “We believe this initiative is another example of Shopify providing extra value for its merchants.”

Toner also spoke about connected tech company Blackline Safety (Blackline Safety Stock Quote, Charts, News, Analysts, Financials TSX:BLN), which last week hosted a webcast investor presentation where it said its total addressable market (TAM) is estimated to be $3.2 billion, comprised of $1.4 billion in wearables and area monitors and $1.8 billion in Software-as-a-Service.

To its favour, management said while incumbents in the in-the-field safety monitoring tech industry have vast financial resources, their offerings have mostly stayed stagnant and are mostly hardware-only products with little focus on connectivity, implying an advantage to Blackline.

“Management highlighted its ability over the past several quarters to grow its revenue while consolidating its cost base, which has resulted in the Company’s expectation to exit FY23 with adjusted EBITDA profitability,” Toner wrote.

“The Company reiterated its expectation of growing its gross margin further, expecting to exit FY23 with product gross margin of 35 per cent and service gross margin in the high-70s, up from 26 per cent and 75 per cent, respectively,” he said.

On cloud-based learning management system company Docebo (Docebo Stock Quote, Charts, News, Analysts, Financials TSX:DCBO), Toner said the company has experienced a deceleration in revenue growth but has made improvement in profitability, heading into the black earlier than expected in the third quarter 2022.

Toner said management expects to exit its fiscal 2023 with double-digit profitability.

“The Company’s strong growth is reflected in its ARR, which grew 29% y/y in Q1/23, and management has stated that the sales cycle hasn’t worsened within its enterprise segment,” Toner said.

On supply chain management company Kinaxis (Kinaxis Stock Quote, Charts, News, Analysts, Financials TSX:KXS), Toner thinks the company has a number of long-term tailwinds ahead of it, with the pandemic pushing companies to put more emphasis on improving their supply chain resilience.

“Following its acquisition of MPO in August 2022, management noted that the addition of supply chain execution and scheduling could double its TAM. The Company has raised guidance four quarters in a row despite a slowing macroeconomic environment, reflecting the Company’s value proposition for customers,” Toner wrote.

Below are nine tech companies under ATB’s coverage (seven of which have Outperform ratings), with all projected returns listed as of the publication date of Toner’s report.

Stock: Shopify (Shopify Stock Quote, Charts, News, Analysts, Financials TSX:SHOP)

ATB Capital rating: Outperform

ATB Capital target price: $90

Projected 12-month return: 5 per cent

Stock: Lightspeed Commerce (Lightspeed Commerce Stock Quote, Charts, News, Analysts, Financials TSX:LSPD)

ATB Capital rating: Outperform

ATB Capital target price: $50

Projected 12-month return: 123 per cent

Stock: Kinaxis (Kinaxis Stock Quote, Charts, News, Analysts, Financials TSX:KXS)

ATB Capital rating: Outperform

ATB Capital target price: $220

Projected 12-month return: 16 per cent