The holiday season cheer is here. The Thanksgiving weekend is the busiest shopping period in North America and marks the beginning of holiday season sales. For a long time, the holiday season brought cheer to retailers and consumer goods. And now it also brings cheer to e-commerce stocks, especially after the pandemic increased e-commerce share in retail sales to 16.3% in the fourth quarter of 2022 from 12.7% in the 2019 quarter, as per the US Commerce Department.
Two top Canadian growth stocks for November
Two e-commerce stocks witnessed their steepest November growth in more than four years of over 50% in 2023. A major reason behind a 50% surge in less than a month is the stock price pullback after the 2022 tech bubble burst and the ensuing aggressive interest rate hikes.
Nuvei
Nuvei (TSX: NVEI) stock bottomed out between April 2022 and October 2023, falling 80% during the interest rate cycle. Apart from the tech bubble burst and rate hike, the payments platform app fell prey to short sellers despite strong fundamentals and growth potential in a stronger economy. As e-commerce volumes picked up in the holiday season, so did the payments volume, driving seasonal revenue growth.
Moreover, asset managers believe that the rate hike is coming to an end. The central bank will begin a rate-cut cycle from next year. The easing of interest rates will encourage spending, boosting payment volume. Nuvei has debt on its balance sheet because of an acquisition. However, it has lower expenses that can help it withstand the higher interest rates and grow in the long term as its interest expense falls.
The stock has surged 49% in November, its highest holiday season growth in a month. There is still room for growth till Christmas, but I would avoid buying the stock at the current price point as it is oversold. But if you own the stock, keep holding it till the holiday season cheer lasts and then consider selling it next year in January.
Shopify stock
Shopify stock moved with the same momentum as Nuvei as both enjoyed holiday cheer. The e-commerce platform’s annual earnings are more skewed towards the fourth quarter. It expected high-teens revenue growth in the fourth quarter. But looking at the Black Friday sales response, Shopify will likely beat its estimates.
Moreover, the company has been cutting costs to return to profitability. It sold its logistics operations, and that helped it report operating profit instead of loss. While the company sees recovery, the mid-holiday season is not the right time to buy the stock. This rally will most likely fade in March, creating a buying opportunity.
While most growth stocks are in their growth spree, some dividend stocks are just picking up momentum. Magna International stock offers a good buying opportunity as it has slipped way too low over the anticipation of a recession. When the recession news is official, these growth stocks could plunge, creating a buying opportunity.
It is time to rethink your portfolio in November and prepare for a rise and/or fall in stock price as the interest rate trend reverses.
