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,
Tecsys (Tecsys Stock Quote, Chart, News, Analysts, Financials TSX:TCS)
- National Bank Rating: Outperform (Unchanged)
Target Price: $65/share (Unchanged)
Projected one-year return: 65.2 per cent
Shao sees a strong quarter coming for Tecsys, predicated primarily on a 50 per cent increase in bookings on a year-over-year basis, and more than three times the previous quarter as it returns to a normal run rate and sorts out its internal capacity issues relating to legal and procurement. The result is expected to be US$36 million in revenue and US$0.06 per share in EPS.
“If anything, we’d continue to point out the SaaS transition as the biggest catalyst in driving the valuation re-rating for this name,” Shao said. “In our view and similar to other supply chain names we cover, we believe the pandemic has created a multi-year runway for a Company with a suite of competitive offerings in the supply chain execution market.”