You’ve probably heard the old investing warning: “Don’t try to catch a falling knife.” It means don’t buy a stock that’s crashing, because you might just get hurt. But what if that “knife” is actually a valuable tool that everyone panicked and threw away? This is the exact dilemma with a stock like TELUS International (TIXT), which is currently trading near all-time lows.
Today, we’re going to use TIXT as our case study. We’ll break down what the company does, why it’s down so much, and the framework you can use to decide for yourself if it’s a calculated gamble or a mistake to avoid.
What Does TELUS International Actually Do?
First, let’s understand the business. If you’ve ever used a chat function on a website to get customer help, or had a company moderate a comment you posted on their social media, there’s a chance TELUS International was behind it.
- Digital Customer Experience (CX): This is their main business. They provide the people and technology that help big companies (think big tech, streaming services, and e-commerce giants) support their customers. This includes:
- Content Moderation: Keeping online communities safe.
- AI Data Annotation: Labeling images, text, and video to help train artificial intelligence. (This is a huge growth area!)
- Multilingual Support: Providing customer service in many languages around the world.
- They are a Spin-Off: TELUS International is a separate company from its parent, TELUS Corp. (a major Canadian telecom). This means it has its own stock ticker and its own financials.
Why is the Stock Price So Low? (The “Falling Knife” Part)
The stock market can be emotional. While a company’s long-term value is based on its profits, its short-term price is based on sentiment. Here’s why sentiment soured on TIXT:
- The Tech Wreck of 2022-2023: Many high-growth, unprofitable tech stocks soared during the pandemic. When interest rates rose, investors fled from these “expensive” stocks to safer ground. TIXT got caught in this broad sell-off, even though its business is more stable than most.
- Fear of AI: This is ironic. While TIXT helps train AI, some investors initially feared that AI would replace the need for human customer service agents. The thinking is becoming more nuanced now, but the fear hit the stock hard.
- Economic Worries: In a potential recession, companies might cut their spending on “non-essential” services. Some investors worry that client budgets for customer experience might be slashed.
The Bull Case: Why It Could Be a “Diamond”
Now, let’s look at the reasons a brave investor might see this as a historic buying opportunity.
- The Price is Low: This is obvious, but it’s the entire thesis. You are buying a piece of this company at a massive discount to where it was a few years ago. If the company simply survives and recovers, the gains could be large.
- The Business is Actually Needed: AI doesn’t build itself. It needs millions of pieces of data labeled by humans to learn. TELUS International is a key player in this essential, behind-the-scenes industry. They are not easily replaced.
- It’s Profitable: This is crucial. Unlike many companies that crashed, TIXT is actually profitable and generates cash. This means it has a much stronger chance of surviving tough economic times than a company that is burning through cash.
A Beginner’s Framework for Deciding
So, should you buy? Ask yourself these questions:
- What is my risk tolerance? This is a volatile stock. If you panic when you see the value of your investment drop 10% in a week, this is not for you. This is a high-risk, high-potential-reward play.
- What is my time horizon? This is not a "get rich quick" scheme. You must be willing to hold the stock for at least 6 months to a year to potentially see the story play out. Our recommended holding period of 1-6 months is a starting point; this might take longer.
- Do I believe in the story? Do you think AI will create more jobs (like data annotation) than it destroys? Do you think companies will still invest in good customer service? If you answer "yes," then TIXT might align with your beliefs.
The Bottom Line: TELUS International is a fascinating test for an investor. It’s teaching us to look beyond a scary stock chart and understand the real business underneath. It’s not a sure thing—no stock ever is. But for investors with the right risk tolerance and patience, it represents a classic gamble: buying a solid company when everyone else is too afraid to.
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