Growth & Innovation 2023 Outlook


Recoupling secular growth and value creation.

Martin Toner, CFA, MBA

As we move into a new year, we review the performance of our Growth & Innovation (G&I) universe. We believe the compression in multiples in 2022 is an overcorrection and that the damage has been mostly done. There is increasing evidence that inflation is abating and the increase in rates, which has been painful for growth stock investors, is largely over. Multiples have compressed, but premiums still exist for quality growth. We believe these multiples are sustainable and have upside to them in many cases. As the respective secular growth stories play out for names such as Shopify Inc. and Lightspeed Commerce, shareholders should be rewarded for owning these currently out-of-favour names. 

The “Unbubble”
We believe the correction has taken growth stocks into “oversold” territory. While predicting the macro is difficult and uncertain, investors can enter growth stories at much more attractive valuations.  

High-quality business models such as SaaS companies held up well, and we expect them to continue to do so in 2023. E-commerce and other sectors struggled to grow, as the impact of emerging from COVID-19 weighed heavily. We expect e-commerce to continue to grow faster than overall retail in 2022 and for the Creator economy to resume its growth. In our opinion, at current multiples, companies in these spaces merely need to produce growth for the stocks to deliver returns to shareholders.   

Inflation Relief
Prices are stabilizing across the globe and in some cases are deflating, and we may have reached the peak in monetary policy response.  

Top Picks for 2022
We believe Shopify will benefit from an improving e-commerce market and that its strong culture of merchant-focused innovation will produce growth and improve on the dreadful sentiment on the name. Kinaxis is a consistent growth story that appeals to investors seeking growth and stability. Docebo’s market-defining products continue to attract larger customers, driving growth that is underappreciated by investors. 

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