2022 is past the halfway point, and it’s been a vicious period for growth-oriented companies. Runaway inflation and rising interest rates continue to drive volatility in nearly all sectors, including the top-performing energy sector. Health care and technology are the worst-performing sectors, with year-to-date losses of 46.89% and 34.02%, respectively.
Individually, two industry leaders and one crypto stock have flopped hard this year. Investors in Shopify (TSX: SHOP)(NYSE:SHOP), Canopy Growth (TSX: WEED)(NASDAQ: CGC), and Hut 8 Mining (TSX: HUT)(NASDAQ: HUT) are down by at least 70% so far in 2022. If you’re still holding shares of these battered stocks, hold on for dear life, as the worst might not be over.
Colossal price drop
Technology stocks, led by Shopify, powered the TSX in 2019 and 2020, posting annualized price returns of 60.2% and 80.3%, respectively. The commerce company rewarded investors with an average gain of 185.94% in two years. However, the overall return in 2021 fell to only 21.68%.
On July 22, 2022, Shopify skidded by 7.28% to widen its year-to-date loss to 72.3%. The performance of the tech leader is a shadow of the phenomenal rise it experienced in the last two years. It stole the thunder from Royal Bank of Canada when it became TSX’s most valuable company on May 6, 2020.
However, Canada’s largest bank dethroned the tech darling early this year to reclaim the crown. As of this writing, Shopify’s market cap stood at $61.39 billion from almost double in May 2020. Unfortunately, declining revenues due to the absence of pandemic-induced online spending caused a colossal drop in the stock price.
Downgrade
Cannabis stocks were promising growth stocks in 2019 following the legalization of marijuana for recreational use in Canada a year before. Canopy Growth was ranked number one in the 2019 TSX30 List — the inaugural flagship program of the TMX Group that features the top 30 growth stocks.
Shopify was second, while three other cannabis stocks (Village Farms, Aphria, and Neptune Wellness) shared the limelight.
Fast forward to 2022, and WEED is losing by 70.02% year to date ($3.31 per share). Also, the total return in 3.01 years is -92.85% (-58.37% CAGR) compared to its meteoric rise in 2019 when it bested 583 eligible Canadian companies. On June 27, 2022, Fitch Ratings downgraded its debt rating on Canopy Growth.
The rating agency said it’s uncertain if Canopy can sustain its capital structure. Fitch added, “It is highly doubtful that Canopy can improve its [earnings before interest, taxes, depreciation, and amortization] EBITDA to reach operating cash flow breakeven in fiscal 2025.”
Tough crypto winter
The crypto winter has been tough on Hut 8 Mining, a $464.27 million cryptocurrency mining company that engages in industrial-scale Bitcoin mining operations. While the stock has gained 27.88% in five days, investors are still under water year to date (-73.21%). The share price is only $2.66 versus the 52-week high of $20.61.
Hut 8 will likely mirror Bitcoin’s movement. The top cryptocurrency outperformed last week, and sustained momentum would benefit other cryptos and crypto-related companies. However, a dip or correction will be disastrous for investors.
Depressed values
The values of Shopify, Canopy Growth, and Hut 8 have gone down significantly, but it’s better to skip them for other stocks with visible growth potential.
