With the TSX continuing to hover near all-time highs, some investors may be spooked by the sheer degree to which equities continue to rally in the face of what appears to be increasingly strong economic headwinds.
That said, this recent momentum has certainly propelled a few top Canadian growth stocks to levels that many thought may have taken years to get to. I’m going to dive into two of these names, their recent runs, and more importantly, why these momentum-driven rallies can continue.
Without further ado, let’s dive in!
Source: Getty Images
Celestica
Canadian AI hardware player Celestica (TSX: CLS) is one of the best-performing Canadian stocks in the market. Currently up a whopping 250% on a year-to-date basis, the chart below is a thing of beauty for growth investors.
The company has benefited from strong demand for its core hardware products, driven by not only the AI revolution but also continued robust demand from hyperscalers and cloud providers. The company’s technology is used not only by firms integrating AI into their operations, but also by more robust cloud players with plenty of cash that need to continue expanding.
Demand for cloud storage and ever-increasing compute tied to AI rollouts should lead to very robust order backlogs for Celestica over time. Indeed, the company has reported impressive numbers on this front in recent quarters. And with a series of earnings beats propelling investors to take the over on future earnings calls, this is a stock I’d definitely put in the momentum bucket right now.
For those who believe AI and cloud computing will continue to drive strong demand, there’s no reason to think this trend can’t continue for a very long time.
Shopify
E-commerce platform provider Shopify (TSX: SHOP) continues to be one of my top picks and one of the most interesting stocks on the TSX worth considering.
Growth in Shopify’s core e-commerce segment, driven by transaction fees and total GMV over the long term, has shown robust trends up and to the right. However, as the stock chart above shows, it hasn’t been a straight line higher for Shopify investors in recent years. That 2022 dip was painful, and one investors are likely to remember.
The thing is, I think that entire ordeal was a function of investors simply getting too far over their skis in the pandemic-era environment. Since the removal of lockdowns and a resumption of in-person shopping took hold, Shopify has continued to see robust growth. This momentum continuing is a strong sign of future profitability and leads to a bullish underlying thesis I think most investors can grasp.
That said, as the company continues to play around and integrate new AI features, I think this growth could accelerate. Businesses want the best of the best when it comes to their platform providers for their online stores. Shopify is the best, and there’s really few companies that can compete.
