Better Buy: Shopify Stock or Air Canada Shares?

Shopify (TSX:SHOP) and Air Canada (TSX:AC) shares are great TSX momentum picks for the second half.

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Shopify (TSX:SHOP) and Air Canada (TSX:AC) are two risk-on turnaround plays that have already begun to reward investors for their bravery this year. At the time of writing, shares of Shopify and Air Canada are now up 26.2% and 73.5%, respectively, year to date.

Indeed, the hot first half could be a sign of things to come for the second half. Either way, Canadian investors should temper their enthusiasm when it comes to the recent names that have enjoyed newfound momentum. Like it or not, a market pullback could be most devastating to the stocks that have seen their prices shoot up at a quicker rate than the TSX Index or S&P 500.

In this piece, we’ll take a closer look at the two Canadian rebound plays to see which may be the best to consider buying for the second half. Undoubtedly, with a recession likely just months away, investors must be prepared for a handful of turbulent quarters.

That said, with a recession already on the radars of analysts covering the name, even a recession-plagued quarter may turn out to be far better than feared. And if we are in for a shallow, soft, or mild landing for Canada’s economy, I do think “better than feared” could become a phrase we hear a lot of in the second half.

Shopify stock: Riding the tech rebound

Shopify stock is in recovery mode, but the more than 80% peak-to-trough collapse in the share price is still fresh on the minds of many investors.

Undoubtedly, what goes up can come down in devastating fashion! Now that Shopify stock has seemingly bottomed, questions linger as to what the fate of the current rally is. Indeed, the year-to-date momentum seems unsustainable, even if interest rates are destined to retreat rapidly over the next year.

Still, one can’t ignore potential catalysts on the horizon. E-commerce sales may be looking up from here. And as Shopify focuses on next-generation technologies (think VR or AR storefronts) and away from capital-intensive fields like logistics, the company may be able to win the hearts of the growth-savvy once again.

In any case, all-time highs seem out of the question for now. At least until Shopify stock can unveil some AI innovations that shock and awe.

Air Canada stock: Flying higher, but still far from all-time highs

Air Canada stock has been a wild ride, but shares may finally be in for a breakout past 2021 highs of around $30 per share. The air travel recovery seems to be in full swing. Though a recession could take away from the recovery, I do see AC stock as already pricing in the effects of the next mild downturn. As such, a “better than feared” economy and earnings may be enough to keep AC stock moving higher from here.

Summertime air travel demand looks hot and could stay hot going into the autumn months. Though I don’t expect pre-pandemic capacity to be reached anytime soon, it’s not hard to argue that things are finally looking up for the top Canadian airline. For that reason, I’m sticking with the name.

Better buy: SHOP or AC stock?

I like Air Canada stock better here, as it’s the cheaper stock with more to gain as we inch closer to pre-pandemic norms. Shopify’s still a great company, but I’m not one to chase a stock that’s more than doubled in less than a 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 Joey Frenette has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Shopify. The Motley Fool has a disclosure policy.

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