NBF - cantechletter 22 Canadian Technology sector stock ratings from National Bank
National Bank Financial delivered a fourth quarter earnings preview on January 23, saying while the road ahead may be bumpy for tech stocks, investors looking at a longer term horizon still have some select names to choose from.
In any industry, opportunities can emerge in the wake of crisis, and with the pandemic still very much in effect, the technology sector is a prime example. Ahead of the Q4 reporting session, National Bank of Canada analysts Richard Tse and John Shao were cautious in their overview of technology in the midst of a shift from growth to value, though they also noted change has been minimal within their particular coverage window.
“No doubt, a lot is riding on earnings season given the heightened volatility across Tech and while we provide our expectations for our coverage group in this note, the reality is that the entire group will be drawn in by what happens with the megacap (largely U.S.) tech names that begin reporting over the next few weeks,” Tse said.
The report also made note of the contributions of moderate estimate revisions in the S&P Tech Index in relation to any pullbacks that have been seen in the sector on top of the standard rates and inflation, leading to a question of whether or not those expectations are too conservative, or are closer to reality.
In general, Tse and Shao remain optimistic about the sector, particularly with respect to a few names like Docebo, Lightspeed and Shopify which the analysts say demonstrate long-term investment opportunities given certain valuation disconnects.
And with those dynamics in mind, Tse and Shao presented 22 stocks in their quarterly preview, listed below in alphabetical order.
Blackline Safety (Blackline Safety Stock Quote, Chart, News, Analysts, Financials TSXV:BLN)
- National Bank Rating: Outperform (Unchanged)
Target Price: $10/share (Unchanged)
Projected one-year return: 58.7 per cent
Blackline Safety, a Calgary-based that develops, manufactures and markets worker safety monitoring products and services, already turned in a strong fourth quarter, with its $19.3 million revenue report coming in well ahead of the NBF projection of $16.1 million and the consensus estimate of $16.7 million. The beat was fuelled by a 129 per cent year-over-year increase in product revenue, along with a number of key contract wins.
“While the FQ4 results have fully reflected the benefits from the strong hardware sales, we’d also expect to see the inflows of the associated service revenue starting in Q2/F22 which would lay a solid foundation for growth in the new year,” Shao said.
“With a suite of competitive products and services and less than one per cent of the market share, we see a long runway of growth ahead of the company,” Shao added.