The uncertainty surrounding Donald Trump’s trade policies has shaken investors’ confidence, thus leading to volatility in the equity markets. The S&P/TSX Composite Index is down over 4.2% from its all-time high. Meanwhile, the pullback offers an excellent buying opportunity in quality growth stocks. Against this backdrop, here are my two top picks.
Shopify
Shopify (TSX:SHOP) offers businesses essential internet infrastructure for commerce. Last month, it posted an impressive fourth-quarter performance, with its GMV (gross merchandise volume) growing by 26% to $94.5 billion. Boosted by GMV growth, increased penetration of payment solutions, and higher revenue from subscription solutions due to new customer acquisitions, the company’s revenue grew by 31% to $2.8 billion, marking the seventh consecutive quarter of above 25% year-over-year growth.
Supported by topline growth and lower operating expenses, Shopify’s operating profits grew 60.9% during the quarter to $465 million. Also, its operating margin expanded by 300 basis points to 16.5%. Moreover, the e-commerce platform generated free cash flows of $611 million, marking a 37% increase from the previous year’s quarter. Its free cash flow margins have expanded sequentially throughout 2024.
Moreover, the growing adoption of omnichannel selling has created long-term growth potential for Shopify. It is also investing in strengthening its R&D (research and development) team to develop innovative products and services to capture the expanding addressable market. Amid these growth initiatives, the company’s management has provided solid guidance for the first quarter of 2025. The management expects its topline to grow in the mid-20s while its free cash flow margins could improve from 12% in the first quarter of 2024 to the mid-teens. So, its growth prospects look healthy.
However, Shopify has been under pressure over the last few weeks amid the broader equity market weakness, with its stock price falling around 25% from its 52-week high. Given its healthy growth prospects and discounted stock price, I believe Shopify would be an excellent buy at these levels.
Celestica
Another growth stock that I am bullish on is Celestica (TSX:CLS), an electronics manufacturing services company. The company has also been under pressure over the last few weeks, losing around 36.5% of its stock value compared to its February highs. The correction has dragged its NTM (next 12 months) price-to-sales and NTM price-to-earnings multiple down to 1 and 19, respectively.
Meanwhile, Celestica posted an impressive fourth-quarter performance in January, outperforming its guidance. Its topline grew by 19% to $2.6 billion amid solid performance from the CCS (Connectivity & Cloud Solutions) segment, which rose 30% year-over-year. Supported by its topline growth and expansion of its operating margin, its adjusted EPS (earnings per share) grew 44.2% to $1.11 during the quarter.
Moreover, Celestica’s long-term outlook looks compelling as the growing usage of artificial intelligence (AI) has increased investments in expanding its AI-related infrastructure, thus raising the demand for its products and services. It has recently acquired two new projects from a hyperscaler and a digital company, where it will support its customers in building fully AI-optimized networking racks and servers. Amid these healthy growth prospects, Celestica has raised its 2025 guidance. The company expects its revenue and adjusted EPS to grow 10.9% and 22.4%, respectively, this year.
