Top Canadian stocks witnessed a strong recovery rally in 2020. Meanwhile, a few delivered outsized returns and handily outperformed the benchmark index. Despite the rally and stretched valuations, I see further upside in several TSX-listed stocks in 2021.
The structural shift towards the multi-channel platform and economic reopening provides a strong growth opportunity and is expected to drive several TSX stocks higher. A large addressable market and continued market share gains augur well for growth. We’ll focus on two such top TSX stocks that could go through the roof in 2021.
Shopify
Shopify (TSX: SHOP)(NYSE:SHOP) stock surged about 182% in one year. Moreover, it is up nearly 29% this year. I expect Shopify to deliver robust financial and operating performance in 2021, which is likely to push its stock higher.
Shopify’s revenues jumped 96% during the last reported quarter. Further, its merchant solutions revenues more than doubled, while its subscription solutions revenues increased by 48% during the same period.
I believe the acceleration in the pace of shift towards digital commerce provides a multi-year growth opportunity for Shopify. Moreover, massive market and accelerated e-commerce penetration are likely to drive its revenues. While favourable industry trends are likely to support Shopify’s revenue growth, its multiple sales and marketing channel and expansion of high-value products are likely to drive its paying merchant base and support its margins.
Shopify’s platform expansion, increasing international presence, multi-currency payments solutions, and growing fulfillment network augurs well for growth. Further, with increased diversification in subscription solutions revenues, strong momentum in merchant solutions revenues, and improving operating leverage, Shopify is likely to outperform the broader markets with its returns.
goeasy
Like Shopify, goeasy (TSX: GSY) has consistently delivered strong returns. Its stock has surged about 259% in three years. Moreover, it has increased by 54% in one year. As for 2021, its stock is already up about 22%.
goeasy’s stellar returns are backed by its strong revenues and high-quality earnings base. Its top line has grown at a CAGR (compound annual growth rate) of 13.1% since 2001. Further, its earnings have increased at a CAGR of 30%, reflecting higher revenues and improving operating expenses.
With the easing of lockdown measures and increased economic activities, goeasy could witness increased customer demand, which is expected to drive its loan portfolio and support revenue growth rate. Meanwhile, the decline in loan protection insurance claims and strong customer payment performance should support goeasy’s financials in 2021.
I believe improving operating environment and large non-prime consumer credit market are likely to provide strong tailwinds for growth. Meanwhile, channel expansion, growing footprint, and new product opportunities provide a strong base for growth.
Also, investors are expected to benefit from goeasy’s consistent dividend payments. It has paid dividends for 16 years in a row. Meanwhile, it has increased the same in the last six years. It pays a quarterly dividend of $0.45 a share, translating into a yield of 1.6%.
Bottom line
Shares of both these companies have consistently delivered outsized returns over the past several years. Meanwhile, favourable industry trends, recovery in demand, product expansion, and strong fundamentals suggest that the uptrend in Shopify and goeasy stock is likely to sustain in 2021.
