Is Now the Right Time to Buy Tech Stocks Trading Cheaply?

After last year’s crash, most Canadian tech stocks see a remarkable recovery in 2023. In fact, the tech sector has outperformed all other major sectors on the TSX, such as industrials and consumer cyclicals, this year by a wide margin. Along with this, shares of several popular technology companies are now trading with strong double-digit year-to-date gains, while the TSX Composite benchmark is up just 4%.

But is this really the right time to buy tech stocks? Let’s talk about that before I highlight a cheap tech stock I see worth considering in July 2023.

Why tech stocks will crash in 2022

Before finding out what’s next for Canadian technology stocks, we need to look at what caused a selloff across the technology sector last year. At the beginning of 2022, persistently high inflationary pressure has made investors fear that the central banks of the United States and Canada will be forced to take aggressive monetary policy actions.

These concerns, combined with the gradual decline in demand driven by the coronavirus for digital products, have severely damaged the sentiments of technology investors, leading to a crash in technology stocks. By mid-2022, the growing geopolitical tension following Russia’s invasion of Ukraine further worsened the global economic environment, making many investors flee risky assets, including technology stocks.

Is it the right time to buy Canadian technology stocks?

While macroeconomic challenges continue to trouble investors even in 2023, some early signs of easing inflationary pressures and the growing possibility that central banks will soon stop raising of interest that led to a recent rally in technology stocks.

In addition, some recently launched generative AI (artificial intelligence) tools have led to increased buying pressure in the technology sector in recent months. While Canadian technology stocks have already seen a remarkable rally this year, let’s not forget that most of them are well below their pre-pandemic year closing levels. Because of that, it may not be too late to buy cheap technology stocks in July 2023, because they can provide solid returns on investments, especially if you hold them for the long term.

A cheap TSX tech stock to buy in July 2023

Based on its year-to-date performance and fundamental outlook, Lightspeed Commerce (TSX:LSPD) might be a great Canadian tech stock that I’ve found cheap today. This Montreal-headquartered, one-stop commerce platform provider currently has a market cap of $3.4 billion, as its stock trades at $22.41 per share with a 16% year-to-date gain.

It’s important to note that despite its recent recovery, LSPD’s stock price is more than 75% lower than its 2019 closing level of $89.84 per share. Notably, a large selloff of Lightspeed shares began at the end of 2019 when a short seller based in New York, Spruce Point Capital, made several vague accusations about the technology company in Canada and its management.

While the Spruce Point accusations hardly made any major changes in the opinion of Street analysts about Lightspeed stock, they seemed to affect the sentiments of retail investors, which led to the crash. However, the fact remains that LSPD’s business growth still looks promising in 2023. In its fiscal year 2023 (ending March 2023), the tech company posted a 33.2% positive year -on-year growth in its top line, despite facing inflationary pressure and other macroeconomic challenges.

Additionally, Lightspeed’s continued efforts to expand its geographic presence and customer base will help it achieve sustainable profitability soon, which will help this Canadian tech stock rally.