Shopify (TSX:SHOP) and Nuvei (TSX:NVEI) were two of the most popular names among Canadian growth stocks prior to the start of 2022, when growth stocks were greatly affected by the economic conditions. Up to that point, both stocks gained as much as 6,000% and 275%, respectively. In the process, Shopify and Nuvei had grown to become very important players in the e-commerce and digital payments industries, respectively.
With growth stocks finally starting to show signs of recovery, which of these two would make the better buy today? In this article, I aim to dive into that question in hopes of helping Canadians add a new stock to their portfolio.
Company backgrounds
Shopify is perhaps the more well known of these two companies. It provides merchants of all sizes with a platform and all the tools necessary to operate online stores. It’s previously been estimated that more than one million businesses rely on Shopify’s platform to operate their online stores. This includes everyone from the first-time entrepreneur to some of the biggest names in the world like Netflix. At one point, Shopify had grown to be Canada’s largest company by market cap.
On the other hand, Nuvei is a more recent company to hit investors’ radars. It held its initial public offering (IPO) in 2020 and wasted no time making headlines. On its first day of trading, it shattered the record for largest IPO by a Canadian tech company ever, raising $805 million in gross proceeds. For those that are unfamiliar, Nuvei provides merchants with an omnichannel payments platform. Using that platform, merchants have the ability to accept online, mobile, in-person, and unattended transactions. That breadth in Nuvei’s offering is what separates it from its competitors.
How do these businesses stack up against each other?
Despite what its stock may show, Shopify has performed very well in recent quarters. Consumer spending has been hit very hard around the world due to a rapidly rising interest rate. However, Shopify has managed to become so well established within the e-commerce industry that its business never seemed to really take a big hit during those tumultuous times. In fact, in its most recent earnings presentation, the company reported that its fourth-quarter (Q4) revenue had gained 26% year over year.
Nuvei, meanwhile, has seen a noticeable hit to its financials in recent months. In Q3 2022, the company did manage to report an increase in revenue. However, it was only a modest increase of 7% year over year. That’s not the kind of performance that you’d hope to see from a stock in its high-growth phase. In addition, its net income and margins both saw massive declines over the past year. This indicates that Nuvei may be having some difficulties scaling its business.
Which company would I buy today?
Shopify and Nuvei are two very exciting businesses that operate in crucial industries. However, today, only one of these companies looks like it may be worth a shot to add to an investment portfolio. In my opinion, that company is Shopify. If Nuvei can turn back the clock and regain its impressive growth numbers, then investors may be able to reconsider that stock in the future.
