In the technology sector, investors are constantly looking for the next big idea that can propel their portfolio sharply higher in the near-term.
Companies like Shopify Inc. (TSX:SHOP)(NYSE:SHOP) are great Canadian examples of relatively recent initial public offerings (IPOs) that have done extremely well. Many investors looking at a company like Lightspeed POS (TSX:LSPD) may believe that a similar story could be in the cards in the years to come.
The Canadian tech sector really only has a handful of companies like Lightspeed or Shopify, making valuing these companies near impossible.
The valuations these mega-growth companies are able to garner eclipse anything most investors in Canadian tech have seen since the rapid rise of BlackBerry Inc. (TSX:BB)(NYSE:BB) around two decades ago. Whether or not companies like Lightspeed or Shopify are able to see share price appreciation really comes down to two things in my opinion: 1) a continued overly optimistic market sentiment around the technology sector in general, and 2) the lack of any recession or major negative economic event.
Barring these events, I do think the runway for a company like Lightspeed could be longer than many thing, as the company continues to add clients at a rapid rate and is ahead of the curve in some respects to the technological paradigm shift in this niche area. There is also the distinct possibility that a company like Lightspeed could be acquired, perhaps contributing to its relatively high multiple. Please remember, this is a high-risk, high-reward play, so invest accordingly.
Invest wisely, my friends.