2 Growth Stocks Bay Street Might Be Sleeping On, but I’m Not

I’m not sleeping on Taiwan Semiconductor (NYSE:TSM) stock. Shopify (TSX:SHOP) is a Canadian stock with similar growth rates.

| More on:

Bay Street seems to be sleeping on many growth stocks. If you look at the typical bank-offered mutual fund, you’ll see that it’s stuffed with a lot of large cap banks, utilities, and energy companies. Not that there’s anything wrong with such companies, but growth is lacking in many “defensive” portfolios of which they are a part. In this article, I will explore two growth stocks that Bay Street is sleeping on, though I am not.

Taiwan Semiconductor

Taiwan Semiconductor Manufacturing (NYSE:TSM) is a Taiwanese semiconductor manufacturing company that has done some impressive growing this year. In its most recent quarter, it delivered:

  • $18.3 billion in revenue, up 16.5%.
  • $1.40 in earnings per share (EPS), up 8.9%.
  • A 53.1% gross margin.
  • A 42% operating margin.
  • A 38% net margin.

Pretty good numbers. Revenue and EPS both topped analysts’ expectations, and the stock rose after earnings came out. As NVIDIA’s contract manufacturer, TSM takes a partial share in that company’s AI-fuelled success. It’s a pretty good company to bet on if you want something like NVIDIA but cheaper.

PDD Holdings

PDD Holdings (NYSE:PDD) is a Chinese e-commerce company that just put out a phenomenal earnings release. The company grew its revenue 131% and earnings 200% year over year in the first quarter. Both figures were well ahead of what analysts expected. PDD’s trading was lukewarm on the day its earnings came out, possibly because analysts who researched the stock thought the numbers were too good to be true. The EPS result was around double what analysts had expected, so it was natural to be suspicious. However, a day after earnings day, the stock rallied by more than 5%, continuing the gains into Friday. It was a pretty good showing from China’s rising e-commerce star.

A Canadian growth star

Although I don’t personally own shares in it, Shopify Inc (TSX:SHOP) is a Canadian e-commerce company that shares some characteristics with the companies mentioned above. The company has high growth, is profitable, and is something of a “unicorn” among Canadian tech companies.

In its most recent quarter, Shopify delivered:

  • $61 billion in gross merchandise volume, up 23%.
  • $1.9 billion in revenue, up 23%.
  • $151 million in monthly recurring revenue, up 32%.
  • $957 million in gross profit, up 33%.
  • $232 million in free cash flow, up 86%.
  • Guidance for high-teens percentage growth in the year ahead.

On the whole, the numbers were pretty good. They didn’t kick off a big rally in Shopify’s stock, but they were encouraging enough to provide hope that Shopify will continue growing into the future.

Foolish takeaway

Bay Street doesn’t seem to be betting on the companies of the future, but many individual investors are. Personally, I have a few “innovative” growth names in my portfolio, including two of the three mentioned in this article. I don’t think “innovation” is worth an infinite price, or that most investors should hold nothing but tech. But certainly, you need at least a little of it in your portfolio if you want to realize high returns.

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 Andrew Button has positions in Taiwan Semiconductor Manufacturing and PDD Holdings. The Motley Fool has positions in and recommends Shopify. The Motley Fool recommends Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.

More on Tech Stocks

Investor reading the newspaper
Dividend Stocks

Emerging Investment Trends to Watch for in 2025

Canadians must watch out for and be guided by emerging investment trends to ensure financial success in 2025.

Read more »

nvidia headquarters with grey nvidia sign in front with nvidia logo
Tech Stocks

If You’d Invested $100/Month in Nvidia Starting a Decade Ago, Here’s How Much You’d Have Now

Nvidia has helped long-term investors create generational wealth. But is the tech stock still a good buy right now?

Read more »

chart reflected in eyeglass lenses
Tech Stocks

Is Shopify Stock a Buy, Sell, or Hold for 2025?

Shopify (TSX:SHOP) still looks like a tempting growth stock going into a new year with strength.

Read more »

A shopper makes purchases from an online store.
Tech Stocks

The Smartest Growth Stock to Buy With $1,000 Right Now

Given its solid sales growth, improved profitability, and healthy growth prospects, Shopify would be an excellent buy.

Read more »

Representation of deep learning neural networks and connectivity
Tech Stocks

Opinion: This AI Stock Has a Chance to Turn $1,000 Into $10,000 in 5 Years

If you’re looking for an undervalued Canadian AI stock with huge upside potential, BlackBerry (TSX:BB) should certainly be on your…

Read more »

chip with the letters "AI" on it
Dividend Stocks

The Top Canadian AI Stocks to Buy for 2025

AI stocks are certainly strong companies, and there are steady gainers in Canada as well. But these three are the…

Read more »

dividend growth for passive income
Tech Stocks

The Smartest Growth Stock to Buy With $1,000 Right Now

Assuming you have the risk tolerance, the right crypto stock may be a compelling investment for rapid growth potential.

Read more »

The virtual button with the letters AI in a circle hovering above a keyboard, about to be clicked by a cursor.
Tech Stocks

The Best AI Stock to Invest $500 in Right Now

The AI market is growing too rapidly for investors to understand the potential and risks of certain AI investments fully.…

Read more »