UPDATE! We’ve updated the analyst picks for 2013, check out the Top Picks of some of Canada’s best tech analysts here.
What stocks will you be watching closest in 2012?
Cantech Letter polled some of Canada’s best technology analysts to see what’s on their list. We asked for Canadian technology stocks, regardless of size, they felt may have a breakout year ahead. Our analysts, Sameet Kanade of Northern Securities, Tom Astle and Byron Berry of Byron Capital, Pardeep Sangha of PI Securities, Barry Richards of Paradigm Capital, and Tom Liston of Versant Partners returned a wide variety of companies, both in market size and in business focus. We ranked their picks in terms of market capitalization as of Monday, January 16th.
March 31st Update: Click here for the Q1 performance of these picks..
1. Research in Motion (TSX:RIM)
Market Cap: $8.83 billion
2011 was, without doubt, Research in Motion’s worst year. The company’s entry into the tablet space, The BlackBerry PlayBook, was widely regarded as a flop, and RIM continued to lose market share in the mobile device sector. The company’s Q3, reported midway through December was typical. It wasn’t that quarter’s numbers; Q3 revenue of $5.2 billion was up 24% from Q2 and BlackBerry smartphone shipments of 14.1 million were up 33% from Q2. It was the future, which many believed looked increasingly bleak for the Waterloo-based mobile giant. Some, however, felt negativity that had taken RIM’s stock to trade below its book value was overdone. Late in the year, Northern’s Sameet Kanade upgraded Research in Motion to a Speculative Buy. “No, this is not a typo,” he said in a note to clients.
2. CGI Group (TSX:GIB.A)
Market Cap: $4.9 Billion
In mid-November, Montreal’s CGI, which is Canada’s largest IT stock, beat their year prior results handily. Revenue was up 15.8% to $4.32 billion and earnings were up nearly 10% to $562 million. CGI CEO Michael Roach says the company’s big bet on the US market is set to pay off. In 2010, Roach spearheaded the acquisition of Stanley, an Arlington, Virginia based systems integrator. Versant Partners analyst Tom Liston thinks Liston US Government and healthcare verticals will drive growth. He has a one year target of $24.50 on CGI.
3. SXC Health (TSX:SXC)
Market Cap: $4 Billion
SXC Health’s meteoric rise, accomplished primarily through acquisition, has been nothing short of remarkable. The company, which was founded in Milton Ontario, has grown from revenues of $33 million in 2004 to just under $2 billion in fiscal 2010. 2010′s performance earned SXC Health CEO Mark Thierer Cantech Letter’s 2010 Canadian Technology Executive of the Year Award. In 2011, he just missed out on a repeat. SXC Health, alongside US based companies such as Medco and Caremark, is a leader in the Pharmacy Benefit Management (PBM) space. PBM’s process and pay prescription drug claims and act as an intermediary between the health care systems and the claimant. The space has grown rapidly; today more than more than 210 million Americans nationwide receive drug benefits administered by PBMs. Versant’s Tom Liston has a target price of $72.50 on SXC.
This story is brought to you by Serenic (TSXV:SER). Serenic’s market cap of $3.78 million (as of January 16th, 2011) was less than its cash position of $4.03 million (as of Q2, 2012). The company has no debt. Click here for more information.
4. Wi-LAN (TSX:WIN)
Market Cap: $680 million
Forget the thwarted bid for crosstown rival MOSAID. Jim Skippen, who was voted by Cantech Letter’s readers and a panel of analysts as the 2011 Canadian Tech Stock Exec of the Year, has guided Ottawa’s Wi-LAN to be one of the biggest successes in the recent history of all Canadian technology. Wi-LAN’s revenue climbed from just over $2 million in fiscal 2006 to nearly $50 million in 2010. But Skippen clearly wasn’t satisfied with breaking the rare fifty-million dollar benchmark, Wi-LAN’s revenue for the first three quarters of 2011 is nearly $82 million. And the company is moving on. Late last year, Wi-LAN bought 1400 patents and applications related to digital TV and video displays from an international consumer electronics manufacturer for $8-million (U.S.) in cash. Paradigm Capital analyst Barry Richards says he’ll be watching Wi-LAN because patents are still a huge issue and because he believes the company is a potential takeover candidate.
5. Descartes Systems Group (TSX:DSG)
Market Cap: $455.5 million
The turnaround of Waterloo-based logistics company Descartes Systems has become the stuff of legend. When current CEO Art Mesher took over in 2004, he estimates that the company had mere days to live and “mattered to no one”. Descartes has since become an emerging leader in global logistics technology; solutions that help its customers make and receive shipments. Descartes now finds itself at the cutting edge of a trend; across the globe governments are looking to untangle and standardize their logistics operations. An increasing amount of evidence suggests a clear link between logistics performance and economics growth.
6. Points International (TSX:PTS)
Market Cap: $127.66 million
Toronto’s Points International lives at the corner of technology and loyalty programs, which these days is a good place to be. Points International manages the back end of loyalty currencies, frequent flyer miles, hotel points, retailer rewards and credit card points. The company has more than fifty partners worldwide including Delta, BestBuy, Starbucks and PayPal. Points has grown its revenue from $30 million in 2007 to more than $95 million in fiscal 2010. PI’s analyst Pardeep Sangha thinks the company can keep growing in 2012 and beyond.
7. Poynt (TSXV:PYN)
Market Cap: $64.7 million
As an app, Calgary-based Poynt has been an unqualified success. The GPS enabled location-based search application has nearly twelve-million users, and has grown 158% in the past year alone. Shareholders would no doubt love to see a resurgence in the fortunes of Poynt the stock, which slipped to as low as a dime after trading as high as $.85 cents before the 2008 meltdown. Poynt the app has been growing for years. CEO Andrew Osis, however, thinks several recent moves signal the beginning of a new era in the company’s history, one that will more closely align the fortunes of the stock with the fortunes of the app. In November, Poynt brought on former Intuit Canada executive Yves Millette in the role of President. The company then added David Lucatch, CEO of Canada’s most heavily traded stock, Intertainment Media, to its board. Then, on December 1st, the company announced what Osis thinks is its seminal deal; Poynt will come preloaded on all Samsung Galaxy devices.
8. 01 Communique (TSX:ONE)
Market Cap: $37.8 million
Mississagua’s 01 Communique, led by CEO Andrew Cheung, has been around since 1992, when it released a a fax program called 01 Fax. The company began developing remote access software in the late 1990′s, and filed for patents related to this technologies in 2000. 01 Communique was subsequently granted two patents in August, 2005. The company, which had gone public in 2000, grabbed the attention of the public markets in 2010 was declared the victor in a four year old patent litigation suit against giant Citrix Systems. Shares of 01 raced to a high of $2.26 in February of 2011 year before a setback in April; a judge ruled that the Mississauga company’s case against LogMeIn (NASDAQ:LOGM) would not go to trial. On April 1st, shares of 01 Communique closed down nearly 78%, to $0.40. But 01 Communique has a new ally in Wi-LAN, which has a new division called Gladios IP that works with other companies to try and unlock the value of their patents. As the first client of Gladios IP, Paradigm’s Barry Richards thinks the added legal muscle will help 01 Communique this year.
9. QHR Technologies (TSXV:QHR)
Market Cap: $25.75 million
Implementation. When technology solutions enter the public conversation, the assumption is that their practical use is not far off. Actual progress, for a myriad of reasons, is often much slower. Nowhere does this apply more than healthcare. Research firm Forrester estimates that the paper based health information “wastes hundreds of billions of dollars annually.” But transforming from paper charts to a digital 21st century healthcare systems is not an overnight fix. Although still small, Kelowna’s QHR Technologies has become an aggressive consolidator in the electronic medical records space. QHR’s recent acquisition of EMIS Inc, the Canadian division of the Leeds based Egton Medical Information Systems, the U.K.’s largest vendor of electronic medical records, was the company’s eleventh acquisition in the past eight years. QHR is clearly gaining critical mass; the company’s revenue has grown from just $5.89 million to $19 million in fiscal 2010.
10. Tio Networks (TSXV:TNC)
Market Cap: $22 million
California, the home of Apple, Intel, Cisco and Oracle, is a worldwide mecca for technology. British Columbia is not. So when PG&E, a utility that powers two-thirds of California wanted a mobile payment application they looked to….Vancouver’s Tio Networks? The PG&E app was a high-profile win for Tio Networks, but it is far from Tio’s only recent success. The company has nearly doubled its revenue since 2009, to more than $36 million in fiscal 2011 Tio Networks, specializes in billing solutions to the “unbanked”; a segment of society that, in the US alone, could be as many as thirty million households that simply do not deal with conventional banks. The Company processed nearly four million transactions in its recent Q3. Northern Securities analyst Sameet Kanade has a $1 target on Tio.