The Canadian stock market has trended higher, with the S&P/TSX Composite Index rising nearly 30% over the past year. This uptrend is expected to continue, driven by higher consumer spending amid declining interest rates and moderating inflation. This favourable backdrop provides a solid buying opportunity for equity investors. Further, Canadians can use the Tax-Free Savings Account (TFSA) to generate tax-free capital gains.
Against this backdrop, let’s explore Canadian stocks that TFSA investors should buy before the year ends with their $7,000 contribution limit.
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TFSA stock #1
Shopify (TSX:SHOP) stock could be a solid addition to your TFSA portfolio before the year ends. While Shopify stock is up about 61% in one year, it has further upside potential. As the leading omnichannel commerce platform provider, Shopify will benefit from the increased consumer spending during the holiday season. Notably, Shopify’s merchants could witness a surge in gross merchandise volume (GMV) during the fourth quarter, resulting in higher revenues and an increase in stock price.
Shopify is well-positioned to benefit from the ongoing shift toward a multi-channel selling model. Further, the higher adoption of its unified commerce solutions, expansion of its merchant base, and focus on innovative products like Shopify Payments and Shopify Capital will likely drive GMV and gross payment volume (GPV) which, in turn, will boost its revenues and supports its share price.
In addition, the company is expanding its payment solutions into international markets and increasing its presence in offline and business-to-business channels. Further, Shopify is leveraging artificial intelligence (AI) to enhance its platform and services, thus accelerating productivity and growth. Moreover, it is transitioning towards an asset-light business model and focusing on reducing costs, which will support its profitability.
TFSA stock #2
TFSA investors could consider investing in Cargojet (TSX:CJT). Canada’s largest cargo airline company is set to benefit from accelerated demand for its services and an increase in retail activity during the holiday shopping season. Notably, Cargojet is Canada’s only network that offers courier companies next-day delivery service to most Canadian households, which gives it a significant competitive edge over its peers and drives demand.
Beyond the seasonal uptick in business, Cargojet stock is expected to continue its upward trajectory in the coming years, thanks to its strong fundamentals. Its long-term contracts are secured by minimum volume guarantees with renewal options, adding stability and visibility to future revenues. Additionally, Cargojet’s agreements, which include cost pass-through provisions, help maintain its profit margins amid fluctuating variable costs.
Furthermore, the company is focused on reducing costs, optimizing its domestic network, and maintaining high service levels to enhance its operational efficiency, conserve cash, and improve margins. These efforts are poised to benefit the company’s operations and financials and thereby deliver stellar returns.
TFSA stock #3
TFSA investors seeking above-average returns could buy Aritzia (TSX:ATZ) stock. This clothing retailer has been consistently delivering impressive sales and profitability, and the increased spending during the holiday season will likely boost the retailer’s revenues.
Aritzia stock has risen about 82% in one year and has solid upside potential. The company has high growth prospects owing to its potential expansion in the U.S. The retailer plans to open new boutiques in the U.S. and increase the total retail square footage by up to 60% through fiscal 2027. These efforts will likely boost its annual sales, which are expected to increase by 15% to 17% per year through fiscal 2027.
Further, its focus on its e-commerce business, integration of omnichannel capabilities, improvement in supply-chain efficiency, and operating leverage will likely accelerate its growth rate, bolster its earnings, and drive its stock higher.
