Trump tariffs have disrupted almost every business in most countries. It is causing an alteration in the global supply chain as many countries that exported to the United States are now looking to diversify their export markets to help their domestic companies sustain tariff shocks. While many Canadian stocks recovered from the tariff impact, one stock continued to decline due to its high exposure to Global Logistics Network. This stock is down amidst tariff headwinds, but there is a silver lining of recovery that makes it a buy right now with $500.
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This stock is down 22% from its 2025 peak: Here’s why
Descartes Systems (TSX:DSG) stock jumped 20% after the April tariff announcement as its database of tariffs, customs duties, and rule changes became the most sought-after information among companies dealing with global trade. However, the stock fell sharply by 15% after the first-quarter earnings were released on June 4. Although there was some recovery in the stock, it slipped further after the August tariff announcements and now trades over 22% below its 52-week high of $177.98.
Descartes Systems’s business is to help companies navigate trade complexities. Almost all logistics-driven companies, from airlines to shipping to trucking, use its transportation management, routing and tracking, compliance, and fulfillment solutions to plan and execute trade of goods, services, and information.
The company’s share price fell significantly as the management stated that tariffs are affecting trade volumes. Its revenue is dependent on trade volumes, as it offers logistics solutions even for a single consignment.
All eyes are now on the second-quarter earnings due to be released on September 3, as that will reflect a full quarter of tariff impact. The second-quarter earnings of companies hit by tariffs have so far reported lower profit margins.
This Canadian stock is at the top of my list of stocks to buy right now
If the tariff headwinds are directly affecting the company, why buy the stock? Isn’t it equivalent to walking in the direction of a tornado?
That is where Descartes’s history and fundamentals come in.
It’s the job of Descartes to tackle trade complexities. On the one side, it is seeing strong demand for Global Trade Intelligence, which means its client base remains sticky. On the other side, the uncertainty of trade volumes is pulling down the stock. However, countries and companies are working out an alternative to live with tariffs.
In the 2018 U.S.-China trade war, trade volumes fell significantly. At that time, Descartes stock fell 20% in the second half of 2018. However, trade volumes picked up in 2019 thanks to trade negotiations and supply chain alterations. Descartes stock made a V-shaped recovery and jumped 40% in the first half of 2019.
As for the fundamentals, the company has zero debt and US$176.4 million in cash to help it survive trade weakness. In fact, it continued to acquire companies as planned and improve its e-commerce offerings. Moreover, the management proactively reduced the workforce by 7% and reduced costs to support its high profit margins amidst weak revenue.
All these reasons make it a stock to buy right now and hold till it shows a V-shaped recovery as the global trade finds its way out of the U.S. tariff maze.
