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Which Should You Buy: BlackBerry Ltd., Sierra Wireless Inc., or Shopify Inc.?

BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY), Sierra Wireless Inc. (TSX:SW)(NASDAQ:SWIR), and Shopify Inc. (TSX:SH)(NYSE:SHOP) are three of Canada’s most popular technology stocks for different reasons.

But which one offers the most promise for investors?

The case for BlackBerry

There are a lot of things to dislike about BlackBerry. Unlike the other two companies on this list, its revenues are in decline, and the company is attempting a turnaround. It is also the only company on this list that’s not a market leader.

But BlackBerry has some unique advantages too. Most importantly, no company is better at securing mobile devices, and this lead appears safe for the time being. Secondly, BlackBerry’s QNX operating system is extremely well positioned in the lucrative Internet of Things (IoT) marketplace. As a bonus, the company possesses roughly 44,000 patents.

According to anonymous sources, Korean giant Samsung Electronics was willing to buy out BlackBerry for US$15 per share in January, but it wasn’t enough. And you can buy BlackBerry today for about US$8. This kind of equation simply doesn’t exist at Sierra or Shopify.

The case for Sierra Wireless

There are two big reasons to prefer Sierra Wireless over the other two companies on this list.

First of all, Sierra is essentially a pure play on the IoT, which is growing rapidly. So, unlike BlackBerry and Shopify, Sierra Wireless doesn’t need to steal market share to achieve rapid growth.

Secondly, Sierra Wireless shares have fallen rapidly and are down about 40% this year. BlackBerry shares have also fallen, but only by 20%. And Shopify shares have increased by 20% since their IPO in May. So, there’s an argument that Sierra Wireless shares have fallen into bargain territory, and this case is harder to make for the other two names.
Why Shopify is the best option

Shopify has its share of skeptics. The Globe and Mail columnist Barrie McKenna said the company “could be the next BlackBerry or Nortel.” Cormark analyst Richard Tse thinks the stock will retreat to the mid US$20s “in fairly short order.”

The main knock on Shopify shares is their sky-high price. The company is valued at over US$2 billion, despite posting only US$105 million in revenue last year. This is an extremely high valuation, especially for a company that’s still posting net losses.

Yet Shopify is still the best choice on this list for some big reasons. First of all, it has far more momentum than either Sierra Wireless or BlackBerry. In fact, Shopify has been doubling its revenues annually. While this growth rate isn’t sustainable long term, at least investors don’t have to count on Shopify’s growth accelerating.

Secondly, Shopify’s customers are extremely loyal, which should make perfect sense. Store owners aren’t going to switch to a competitor when they see a better offering. It would entail too much risk, and be far too big a headache. Meanwhile, companies like BlackBerry must keep innovating just to hold to its existing customers.

Finally, Shopify has the most potential to post big profits as it grows. Fixed costs like R&D can be spread over a larger revenue base, not unlike at other software companies. Hardware-focused companies like BlackBerry and Sierra Wireless will struggle more in this department.

To put it simply, investors can wig big if Shopify keeps doing what it’s already done. Meanwhile, BlackBerry shareholders are counting on a turnaround, and Sierra Wireless needs its growth to accelerate. It should be clear by now which is the winning bet.

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Fool contributor Benjamin Sinclair has no position in any stocks mentioned. David Gardner owns shares of Sierra Wireless.

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