Canadian stocks at large made yet another all-time high on July 7 amid hopes of normalcy. Although new variants of the virus bring back the jitters of more restrictions, markets will likely continue to soar higher in the medium to long term. So, how are you playing the re-opening rally? Here are my top growth bets for long-term investors.
The meal-kit delivery company Goodfood Market (TSX:FOOD) reported another strong quarterly revenue growth on July 7. Its revenues for the quarter that ended on May 31, 2021, came to $108 million, a handsome increase of 24% year over year. However, the company reported a loss during the quarter.
The pandemic served as a catalyst for Goodfood, where its subscribers preferred staying home and ordered groceries and meal kits. It has seen substantial growth in its subscriber growth since last year.
This changed consumer behaviour could continue to aid the company to some extent in the post-pandemic world as well. At the same time, once restrictions wane, and people are allowed to dine out, Goodfood might see weakened demand.
After peaking in January, Goodfood stock has almost halved in value and is currently trading at $8.8. It is trading 1.5 times its sales and looks attractive from the valuation standpoint. If the company maintains its revenue growth momentum for the next few quarters, the stock should see ample growth even when things normalize.
Shopify announced last month that it has expanded its partnership with Facebook and Google. Shop Pay will be available to merchants selling on these two platforms from late 2021. The recent comeback rally highlights investors’ confidence in SHOP stock that it will continue to outperform post-pandemic as well.
Shopify stock looks exorbitantly overvalued as it boasts a price-to-earnings multiple of 120x at the moment. However, it has a significantly large addressable market and a fast-growing share in it.
I think traditional valuation metrics might misrepresent Shopify’s growth prospects. Its addressable market of small- and medium-scale businesses is valued at around US$153 billion, of which Shopify earns around $3 billion in revenues, indicating huge room for growth.
Air Canada (TSX:AC) stock has fallen almost 12% since last month on fears of the mutating virus. However, if you are a long-term investor, these short-term gyrations should not bother you. I am pretty optimistic about Air Canada’s recovery in the next two to four quarters and beyond. Although it may not reach its 2019 profitability levels soon, it could create remarkable value for shareholders.
Air Canada recently announced a resumption schedule to 17 routes for the summer. The flag carrier has been operating at a trivial capacity since last April. Restarting its operations indicates the company’s confidence in returning air travel demand. It will likely fly with significantly higher capacity in Q4 2021 and in 2022 with more clarity on the pandemic and travel demand.
AC stock is still trading 50% lower than last year’s high. As its operations normalize in the next few quarters, Air Canada could see solid revenue recovery and a rallying stock.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. The Motley Fool owns shares of and recommends Facebook and Shopify. The Motley Fool recommends Goodfood Market Corp and recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify. Fool contributor Vineet Kulkarni does not hold any position in the stocks mentioned.