It’s hard to believe, but we’re now less than two months away from closing off 2024. For the most part, it’s been a strong year for stocks. Despite the numerous uncertainties (it was a U.S. election year) and geopolitical tensions from various parts across the globe, the TSX Index and S&P 500 have found a path higher. And going into 2025, returns may just be harder to come by.
After all, the TSX Index is up more than 16% year to date. Unless there’s a correction in the cards within the next few weeks, I’d argue the Canadian big board is poised to close off one of its best years with strength.
While valuations seem fairer today than a year ago, I still think the TSX rally has room to run from here, even if the S&P 500 is bound to take a breather. Though growth-to-value rotations are hard to predict, I believe the TSX Index’s cheaper multiples will help it beat the S&P 500 in such a rotation. Of course, we’ve heard much about extended multiples in U.S. stocks and the possibility of lesser returns for the next decade.
However, I’m not sure you can say Canada has the same issues, not with relatively muted multiples and a wide range of innovators that I believe are still underrated relative to their counterparts trading south of the border.
Personally, I think Canada’s technology scene doesn’t get half the credit it deserves. And as the AI boom looks to play out in 2025, the following two growth stocks, I believe, could shine brightly.
Shopify stock: Don’t sleep on the $142 billion tech titan
Shopify (TSX:SHOP) is Canada’s brightest tech play, at least in my opinion. While it’s been a rather volatile ride in recent years, I still think there’s a tremendous benefit to owning the name as we move into 2025, a year that could see some of the less-appreciated AI software plays start to pick up more traction.
Not only does Shopify have a high growth ceiling as it looks to be more competitive with large business customers, but it also has the AI talent to move ahead of its rivals in e-commerce. In numerous prior pieces, I praised Shopify as an AI stock that had the opportunity to score a decent bang for its invested buck. Going into 2025, I think we could see more AI features and updates begin to move the needle for the stock.
At the end of the day, Shopify provides value-adding services that can be made significantly better with ever-advancing AI tools that go well beyond chatbots. Sometimes, it’s the AI tech that customers don’t see that can provide the greatest value.
At writing, SHOP stock is trading at over $110 per share after blasting off more than 36% in three months.
At 80.5 times trailing price-to-earnings (P/E), shares may look frothy. However, if Shopify can leverage AI to steal more market share from rivals in the new year, I think such a multiple is worth paying for. In fact, given the Canadian tech darling’s track record, I’d argue the stock could still be cheap relative to its longer-term (think five years out) growth potential.
