Canada isn’t known for technology businesses. Unfortunately, many Canadian investors who want exposure to the tech sector usually find themselves venturing into exchanges south of the border for innovative names.
For Canadians seeking innovative tech stocks, who don’t want to venture into foreign markets, there are a few options available. BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY) and Shopify Inc. (TSX:SHOP)(NYSE:SHOP) are two of the most popular Canadian stocks trading on the TSX with promising long-term prospects.
Let’s have a look at both businesses to see if either is a solid pick for your portfolio.
BlackBerry Ltd.
BlackBerry has fallen out of favour over the last decade. The company has thrown in the towel on its hardware business and has doubled down on software development, which is a higher-margin business with lower risks.
Earlier in the year, shares of BB soared following bullish statements made by Andrew Left and his firm Citron Research. The firm praised BlackBerry’s QNX project and stated that it’s a “game changer” in many areas, including self-driving cars. BlackBerry was also rumoured to be an attractive takeover target, and many investors flocked into the stock over a short period of time following a perfect storm of bullish headlines.
In a previous piece, I’d warned investors that the hype was overdone and that a pullback would occur once the short-term hype faded. BlackBerry CEO John Chen has steered BlackBerry back on track, but it’s going to take a lot longer than just a few months to realize a sustained upward rally.
There are many applications to BlackBerry’s ultra-secure QNX operating system, and it’s likely that many B2B deals will be made in the coming months. In addition to promising software projects, the company will also be collecting royalties from BlackBerry-branded devices created by other companies.
Shopify Inc.
Shopify is one of the hottest momentum stocks trading on the TSX over the past year. The company has a front-row seat to the red-hot small- to medium-sized business (SMB) e-commerce markets.
Although the company isn’t profitable yet, the platform has a wide moat — so wide that even the infamous disruptor Amazon.com, Inc. decided to shut down its competing Webstore platform and partner up with Shopify. If you can’t beat ’em, join ’em, right?
Shopify is still in the very early stages of its growth cycle, and it’s likely that subscriber growth momentum will continue over the short to medium term.
The SMB niche can be quite tricky over the course of the long term, however. Start-ups and small businesses tend to have a high failure rate, and as time progresses, the failure rate tends to increase up to a certain point. If a Shopify merchant goes belly up, that’s a lost subscriber. If an economic downturn happens, that’ll mean a tonne of start-ups will go under, resulting in subscriber losses.
Bottom line
BlackBerry is probably a better pick for a value-conscious investor looking for long-term gains from the company’s turnaround. If you don’t think a recession is in the cards over the next few years, then Shopify would probably be a better bet, since it appears that subscriber growth is a long way from slowing down, and profitability is just on the horizon!
Stay smart. Stay hungry. Stay Foolish.
