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.
Farmers Edge (Farmers Edge Stock Quote, Chart, News, Analysts, Financials TSX:FDGE)
- National Bank Rating: Sector Perform (Unchanged)
Target Price: $4/share (previously $5/share)
Projected one-year return: 37.5 per cent
In Tse’s view, the fourth quarter results from Winnipeg-based digital agriculture solution provider come with some downside risk despite company management’s optimism. Going forward, Tse notes a significant opportunity for Farmers Edge could come from carbon offsets, with the potential of carbon’s current price point of $20/metric tonne doubling by 2030.
“That opportunity could be a notable driver of adoption for the Farm Command Platform,” Tse said. “However, the execution in recent quarters suggests considerable volatility and with the current inflation backdrop for inputs, we believe it will weigh on adoption short term.”
The analyst said he sees downside risk to the company’s fourth quarter results, however, with his estimates at US$18 million in revenue and negative US$0.20 per share in EPS.