TSX Weekly Recap: What Happened in the Markets This Week?

Canadian cannabis companies continued to underperform the TSX in the last week.

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The iShares S&P/TSX 60 ETF (TSX:XIU) is down 0.54% in the last five trading sessions. Despite the marginal pullback, the index is has gained 29% year to date. Let’s see what impacted the TSX this week.

Shopify downgraded by Loop Capital

Shares of Canadian e-commerce giant Shopify (TSX:SHOP)(NYSE:SHOP) were downgraded by Loop Capital on Monday. Loop Capital analyst Anthony Chukumba downgraded SHOP stock from “Buy” to “Hold” but reiterated a price target of US$1,600. While Chukumba confirmed that Shopify’s growth story remains compelling, the absurd valuation surrounding the company led to the downgrade. Shopify has a forward price-to-2022-sales multiple of 28, which is extremely steep. The stock ended trading at $1,681.30 on Thursday.

Cannabis stocks continue to underperform

Canadian cannabis stocks continued to underperform the broader markets this week. Shares of Canopy Growth, Cronos Group, Tilray, Aurora Cannabis, and HEXO fell by 11.4%, 15.8%, 13.5%, 9.4%, and 23%, respectively, in the last five trading sessions.

On Thursday, Barclays analyst Gaurav Jain initiated coverage on three cannabis stocks. Jain assigned an “underweight” rating to Tilray and Cronos while providing an “equal-weight” rating to Canopy Growth.

According to the analyst, the upside potential for Canadian cannabis companies is limited due to the small size of the country’s domestic marijuana market.

In addition to access to a smaller market, Canadian cannabis producers have been impacted by a slew of structural issues in the last three years. Most companies operating in this industry have been hit by widening losses, shareholder dilution, rising competition, a decline in market share, and billion-dollar write-downs.

Real Matters fell 14% following fiscal Q4 results

In the fiscal Q4 of 2021 that ended in September, Real Matters (TSX:REAL) reported net revenue of $35 million, which was a year-over-year decline of 25.5%. Its adjusted net income per share fell by 50% to $0.09 in Q4. Comparatively, Bay Street forecast the company to report sales of $42.46 million with adjusted earnings of $0.10 per share in the quarter.

Real Matters shares were down 14% following its less-than-impressive results in Q4. The stock is now down close to 60% year to date, trailing the broader market by a wide margin.

Definity Financial is Canada’s largest IPO in 2021

Yesterday, Definity Financial disclosed an underwriting agreement for its IPO. The company offered 63.63 million shares at a price of $22, raising $1.4 billion in the public issue. According to a report from BNN Bloomberg, this is Canada’s third-largest IPO in the last five years and the largest one in 2021.

The company also sold $700 million worth of shares via a private placement to the Ontario Pension Plan and Swiss Re, bringing the total capital raised to $2.1 billion. Definity is the seventh-largest player in Canada in the property and casualty-insurance segment with a market share of 4.6%. In the first nine months of 2021, its gross premiums were close to $2.4 billion — an increase of 16% year over year.

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.

Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Shopify. The Motley Fool recommends HEXO Corp. and Real Matters Inc.

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