With volatility getting that much more intense in the fourth quarter, many investors might be hesitant about putting new money to work, especially in the wild world of tech. In this piece, we’ll check in on some of the Canadian names that were dragged down in the past few weeks, primarily due to fading appetite for higher-multiple growthier names.
Even if there’s still more pain to be had as AI stocks digest a wave of news, from Jensen Huang’s affair and the impact on the AI trade itself to the looming Anthropic IPO, I think those seeking value might just be able to get it as markets continue to be turbulent going into chillier (and choppier) months.
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Shopify
First, we have Shopify (TSX: SHOP), which has arguably been one of the more volatile large-cap Canadian stocks. Indeed, it’s a tech play and one that stands to benefit greatly from the rise of agentic AI. As AI agents become more capable and reliable, my guess is that AI shopping could continue to be a theme that helps uplift Shopify.
In numerous pieces, I highlighted agentic commerce as still in its early days and the likelihood that many investors are questioning whether everyday consumers are going to entrust their credit cards to any sort of AI agent. In my view, agents need to earn the trust of users before an AI shopping wave really starts to hit.
In any case, Shopify is one of the companies that’s in the right place at the right time. And while agents could run into a roadblock as AI data centre buildouts look to slow, my guess is that Shopify will remain a name that’s ready to rise in due time as the technology matures and gets considerably better with time.
With the stock down close to 18% from its highs, I’d view Shopify as more of a long-term hold than anything to hit the panic button over. Sure, the shares aren’t the cheapest at 92.1 times trailing price-to-earnings (P/E), but with AI channels already experiencing meaningful growth, I do think the firm can grow into its premium price tag.
Constellation Software
For those seeking more value, Constellation Software (TSX: CSU) looks ripe for picking for the growth portfolio. The stock appears to have bottomed out after a vicious year-long decline that wiped out just over 55% of its value. Indeed, the SaaSpocalypse, as it’s called, seems to be yesterday’s news.
When it comes to Constellation, it seems like the crash was greatly exaggerated, with the name now up over 50% from its January lows. At the end of the day, Constellation has the buying power to make smart deals across the software space. And perhaps something like the SaaSpocalypse bodes well for Constellation as it looks to land better deals across the scene.
Like it or not, CSU stock is on the mend, and I think the recovery story is far from over as AI looks to decrease the cost of software production. Perhaps the smaller software firms that aren’t effectively leveraging AI might be better off in the hands of the likes of a Constellation. Either way, I still view CSU stock as a misunderstood value play at 18.7 times forward P/E and would look to consider nibbling into dips.
