For Canadian investors, there has been no shortage of volatility in stock prices as of late. Many growth stocks have seen this volatility manifest itself as impressive gains in recent months, much to the cheer of many in the markets. However, other top growth-oriented companies haven’t been so lucky. In many respects, there’s somewhat of a bifurcation brewing in the market right now.
Accordingly, let’s dive into two TSX stocks I think are worth buying and one that’s a sell. The first two are among the growth stocks I’m most bullish on, and I’ll finish with my sell pick.
Let’s dive in!
Shopify
Shopify (TSX:SHOP) is an e-commerce giant situated in Canada, providing services to mid and small-size businesses. The company has two segments: merchant solutions and subscription solutions. Shopify’s cutting-edge technology enables merchants to design, manage, market and sell their products and services effectively and efficiently.
The company’s recent results point to a strong growth picture, with sales rising 24% year over year and the company posting a rather healthy 13% operating margin. In short, Shopify is producing profitable growth, and though its multiple remains high, investors buy this stock for its growth potential rather than its valuation at present.
I think there’s room for Shopify’s stock price to continue growing so long as the company’s fundamentals continue to improve. Much of this view has to do with the fact that Shopify has an incredible long-term runway due to its untapped global total addressable market. As Shopify enters new markets and continues to see the sort of growth it’s realized in North America, all bets are off with respect to how large this company could get.
Constellation Software
Constellation Software (TSX:CSU) is a Canada-based company that develops and customizes software for private and public-sector markets. The company specializes in acquiring, managing and building vertical-specific businesses. In addition, the company has two segments: the private sector and the public sector.
Constellation has grown at the impressive rate it has over the long term due to its acquisition model. Essentially, Constellation finds undervalued software stocks, and brings them under its portfolio. Over time, these businesses see their core metrics improve, and Constellation reaps the benefits.
Looking at the company’s long-term growth chart above, it’s clear there are few other Canadian tech stocks with this kind of long-term trajectory. Like Shopify, Constellation’s valuation is high. But investors buy this stock for its quality. Accordingly, I think more investors looking for “sure bets” in the growth arena will continue to focus on Constellation Software moving forward.
Lightspeed Commerce
Lightspeed Commerce (TSX:LSPD) is a company I’ve been on the fence with in the past. Yes, this stock saw similar e-commerce tailwinds to Shopify during the previous 2021 hype-driven rally. However, unlike Shopify, this stock’s longer-term chart has remained bearish, as profitability has remained elusive for this hardware and software point-of-sales provider.
Lightspeed’s business model has shifted somewhat from being primarily a provider of point-of-sales systems for retailers. But that’s also the majority of its business, with other acquisitions not paying off the way investors initially hoped.
With significant dilution in recent years and unfavourable fundamentals, I think there are simply much better options out there for investors to consider. Thus, this stock remains a sell in my books for the time being, though I can also see this stock come into play as a potential momentum trade, if a turnaround picture emerges. In any case, it’s a stock to keep on the watch list for now.
