Despite the rising COVID-19 cases globally, the Canadian equity markets have remained strong this month, with the S&P/TSX Composite Index rising 3.6%. Canada’s better-than-expected fourth-quarter GDP and the clearance of the US$1.9 trillion coronavirus relief package in the United States have boosted the Canadian equity markets. However, few companies have witnessed a sharp pullback of over 15% during this period. Let’s examine whether buying opportunities exist in any of these stocks.
After rising over 161% in the first two months, Facedrive (TSXV:FD) has lost 47.5% of its share value this month. The concerns over its steep valuation appear to have dragged the company’s stock price down. Despite the fall, its valuation still looks expensive, with its price-to-book multiple standing at 120.1.
Meanwhile, there were few positive developments in the last few days. The company’s key executives had agreed to extend their shares’ lock-up period while the company’s contact-tracing platform, TraceSCAN, achieved a “co-sell ready” status on the Microsoft Partner Network. Further, its environmentally friendly approach has been gaining traction with millennials. Despite its high-growth prospects, I am skeptical of going long on Facedrive, given its lofty valuation.
Amid the expectation of life and businesses soon returning to pre-pandemic ways due to the expansion of the vaccination programs, people are shuffling their portfolio by replacing high-growth tech stocks with value stocks. This shift led Goodfood Market’s (TSX:FOOD) stock price to fall 23.7% this month. Meanwhile, I believe investors with over two years of investment horizon should utilize this correction to accumulate the stock to earn superior returns.
Given the accessibility and convenience of online grocery shopping, I believe the demand for Goodfood Market’s service could sustain even in the post-pandemic world. Meanwhile, the company’s strong customer base, penetration into newer markets, and sectoral tailwind augur well with its growth prospects. The company is also focusing on increasing its product offerings and strengthening its production capacity, which could boost its financials in the coming quarters.
Green Thumb Industries
Green Thumb Industries (CNSX:GTII) has lost over 21% of its stock value this month. The fall was largely due to the emergence of reports that the company is under federal investigation over possible pay-for-play violations while securing growing and distribution licences in Illinois and other states. Despite the near-term weakness, the company’s long-term growth prospects remain intact. So, I believe investors should utilize this correction to buy the stock to earn superior returns over the next two years.
Green Thumb Industries’s top-line grew 12.8% on a sequential basis and 133.8% year over year in its recently reported fourth-quarter earnings. It posted a positive net income for the second consecutive quarter and positive operating cash flows for the fourth straight quarter. The company currently operates 56 Rise brand stores in the U.S. and still owns 41 more licences to expand its retail presence. Further, the expanding United States’s cannabis market offers high growth prospects for Green Thumb Industries.
WELL Health Technologies (TSX:WELL), which had delivered an impressive 470% returns in the last 14 months, has been under pressure this month, losing 19.5% of its stock value. I believe investors should utilize this pullback to buy the stock, given the sectoral tailwind, its aggressive acquisition strategy, and improving operating metrics.
The telehealthcare sector could witness strong growth over the next few years. Fortune Business Insights expects the sector to grow at a CAGR of above 25% over the next seven years. In its recently reported fourth quarter, WELL Health’s top line grew by 75%, while its adjusted EBITDA moved to positive territory for the first time in the company’s history. The company is also working on completing CRH Medical and Intrahealth Systems’ proposed acquisitions, which could boost its annual revenue to around $300 million.