Growth might be out of favour on Wall (and Bay) Street these days, but as some fear a long and gruelling correction or bear market, others may find opportunities to get discounts on the shares of companies that remain on the right track, with narratives that were just as good as they were when stocks were close to their prior all-time highs. Either way, growth and value can coexist today, especially if we’re talking about companies taking steps to unlock the full potential of AI and other emerging technologies.
Of course, the AI trade was bound to run out of momentum at some point. And while there are still some glimmers across the tech scene, it seems mostly unloved stocks these days, perhaps even hated enough that still-interested buyers might be able to benefit from the upside with a bit less of the risk compared to when stocks were markedly higher before the year (and correction in the Nasdaq Composite Index) began.
Either way, let’s get into two intriguing growth stocks that are under pressure, perhaps for no good reason.
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Shopify
Shopify (TSX:SHOP) stock is struggling to find its footing after the vicious plunge that coincided with the so-called SaaS-pocalypse (or bear market in software stocks). Undoubtedly, the selling seemed to be overdone in February, and, for a while, it seemed like the bottom was in and it was time to go fishing for deep value in the names, including Shopify. As it turned out, though, it didn’t take too long for AI to start weighing down the mood of the software names again, including the ones that actually stand to benefit from the rise of tech over the long term.
Personally, I think SHOP stock is one of the AI beneficiaries that ought to be spared from the software sell-off. Indeed, agentic commerce (or AI shopping) is a fast-emerging field, and it’s one that could give a company like Shopify, which is the ultimate e-commerce platform for e-tailers beyond the juggernauts, an edge.
Of course, where some see opportunity, others may perceive risk. And AI can certainly act as both for companies as they inch into the AI waters. In my view, Shopify is a company that has a greater advantage as AI tools come into the equation, as they leverage the tech to better compete with behemoths in the space.
Of all software names down big this year, SHOP stock has to be one of my favourites. Of course, the stock remains expensive at more than 62 times forward price-to-earnings (P/E), which may already price in a lot of the AI tailwinds at play. Either way, I’d pin the name as a must-watch growth stock.
Loblaw
I know it’s hard to believe, but Loblaw (TSX:L) is actually a pretty tech-savvy company. It might not be launching an LLM, but it is making use of the tech to boost its fundamentals. Whether it’s using AI to improve operating efficiencies or automating things behind the scenes, there’s ample cost savings to be had. Combined with the self-driving truck potential, Loblaw may very well be able to save money from the rise of AI without having to spend nearly as much on CapEx as the model makers themselves.
In terms of AI tech utilizers, Loblaw gets top grades. And, of course, like Shopify, Loblaw might stand tall as an AI shopping winner as well, especially as agents look to prioritize retailers with the best prices for a certain good. If SHOP stock is too pricey, perhaps shares of L are more enticing at less than 25.0 times forward P/E. As the firm continues to expand rapidly (80 new stores this year), I think the multiple underestimates the growth to be had over the next five years.
