The market is in rally mode. As governments on both sides of the border release plans to re-open the border, the markets are reacting positively. In April, the S&P/TSX Composite Index is up 13.7%. If you are looking to ride the momentum, there may be no better place than the top tech stocks.
The S&P/TSX Capped Information Technology Index is up by 13.41% year to date, far outpacing the 14% loss suffered by the broader Index. Not only is the sector proving to be a defensive one in this crisis, it is also outperforming during the current market rally.
The Tech Index is up by 27.33%, double that of the S&P/TSX Composite Index. Considering this, here are two top tech stocks that are poised to outperform should the market rally prove sustainable.
Canada’s top tech stock
Since it has gone public, the company’s share price is up by 2,730%. Thus far, it has been a safe bet to double almost every year. It is once again well on its way in 2020 with gains of 61% year to date.
Shopify is on a mission — not to become the top tech stock, but to become the most valuable publicly traded company in Canada. It recently passed Toronto-Dominion Bank as the second-most valuable and is within earshot of Royal Bank of Canada. Don’t underestimate the company.
Shopify has outlasted notable short-sellers Citron Research and consistently outperforms. Since it went public, the company has topped earnings and revenue estimates all but once. This is impressive considering the already lofty expectations.
The company is currently trading at all-time-high valuations but is certainly worth a look on any meaningful pullback.
Shopify’s little brother
Often compared to Shopify, Lightspeed POS (TSX:LSPD) is another top tech stock worth another look. Lightspeed went public last March and closed the year with impressive gains. In 2019, the company’s share price gained 90.85%.
Unfortunately, Lightspeed is underperforming both the broader market and the tech index. Why the underperformance? The company caters to small- and mid-sized business (SMB) restaurants and retailers. These have been some of the hardest-hit industries. In fact, there is a real fear that COVID-19 mitigation efforts will sink many businesses within their target market.
As a result, Lightspeed’s stock price cratered and, at one point, lost approximately 75% of its value in 2020. On the bright side, as the economy re-opens, Lightspeed has the potential to post outsized gains. Case in point, Lighspeed’s stock price is up 39% in April alone.
Lightspeed still has plenty of room to run, as it is still trading at a 56% discount to its 52-week high of $49.70 per share. Assuming the economy recovers well, a double is not out of the question for this top tech stock.
Earlier this month, the company announced that it expects to report fourth-quarter revenue at the upper end of guidance released in February. Much like Shopify, the markets may be underestimating Lightspeed’s resiliency during these times.
This top tech stock is well positioned to help SMB retailers and restaurants move away from legacy on-premise systems to cloud-based, omni-channel solutions. This is especially true as industries shift to accept online orders. Finally, Lightspeed is well capitalized with US$220 million in cash, which is more than enough to help the company weather the current crisis.
It is one of the best positioned to rebound in a big way once the economy re-opens.
One little-known Canadian IPO has doubled in value in a matter of months, and renowned Canadian stock picker Iain Butler sees a potential millionaire-maker in waiting…
Because he thinks this fast-growing company looks a lot like Shopify, a stock Iain officially recommended 3 years ago – before it skyrocketed by 1,211%!
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Fool contributor Mat Litalien owns shares of Lightspeed POS Inc, Shopify, and TORONTO-DOMINION BANK. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Shopify and Shopify. The Motley Fool owns shares of Lightspeed POS Inc.
Scotiabank profit plunges 40% as bad loans more than double amid COVID-19 – CBC.ca
Scotiabank posted a profit Tuesday morning of $1.32 billion in the three months up to the end of April, a fall of more than 40 per cent from last year’s level as the bank set aside twice as much money for bad loans.
The bank’s provisions for credit losses totalled nearly $1.85 billion for the quarter. That’s up 111 per cent from the $873 million worth of bad loans the bank revealed in the same three months last year, well before the COVID-19 pandemic crushed the economy.
Higher loan loss provisions don’t necessarily mean that all of those loans will end up defaulting. Rather, it just means that they aren’t being actively being paid back as planned.
The bank revealed on Tuesday that 300,000 of its Canadian customers have applied for some sort of financial relief on the $60 billion they collectively owe to the bank. That would include mortgagees who asked for interest rate deferrals.
Scotiabank has a huge presence in Latin America, and the bank says it has processed two million applications for loan relief from its international customers.
Not all of those loans will necessarily end up defaulting, but some may. So the uptick in loan loss provisions is troubling.
Scotia is the first of Canada’s big banks to reveal its financial performance through the current pandemic, numbers which will be closely scrutinized as they are considered to be a bellwether for the broader economy. That’s because pain at other businesses tends to show up on the books of the banks that lend to them.
Canada’s other big banks — Royal, Toronto-Dominion, Canadian Imperial Bank of Commerce and Bank of Montreal — will report earnings in the next few days.
On an adjusted basis, Scotiabank’s profit for the quarter came in at $1.04 per diluted share. That’s well down from $1.70 per diluted share a year ago, but ahead of the 98 cents that analysts who cover the bank were expecting.
Not all bad news
But not all parts of the bank’s business saw tough times. Indeed, some did even better than usual.
Scotia’s global wealth management business posted a profit of $314 million, an increase of four per cent over last year’s level. That uptick came about with investors around the world becoming much more active than usual as global stock markets plummeted.
“This quarter saw record results for both new client account openings and trading volumes in Scotia iTRADE,” the bank said.
Similarly, the global banking and markets business posted a profit of $523 million, up 25 per cent from a year earlier.
Scotiabank's loan-loss provisions double on coronavirus risks – The Globe and Mail
Bank of Nova Scotia on Tuesday reported quarterly profit that beat analysts’ estimates due to a strong performance in the capital markets business, but the bank’s loan loss provisions jumped two-fold.
Provisions for loan losses at Scotia more than doubled to $1.85 billion from a year earlier as it set aside more money to meet future losses.
Canadian banks are expected to face loan defaults as the coronavirus pandemic drives the world into a recession, leaving small and medium-sized businesses scrambling to meet their debt payments.
The bank said commercial and corporate performing loan provisions increased by $275 million, hurt by the poor macroeconomic outlook and a plunge in oil prices that impacted the energy sector globally.
Adjusted net income at its global wealth management segment rose 3 per cent to $314 million, while profit at the global banking and markets business jumped 25 per cent to $523 million.
Canada’s third-biggest lender said net income fell to $1.24 billion, or $1 per share, in the quarter ended April 30, from $2.13 billion, or $1.73 per share, a year earlier.
On an adjusted basis, the lender earned $1.04 per share, compared with analysts’ estimate for profit of $0.98 per share, according to IBES data from Refinitiv.
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