Paradigm Capital reveals its top Canadian tech stock picks for Q4

Canadian Tech Stock Picks

Paradigm Capital analysts have released their fourth quarter Top Picks, with technology and innovation stocks featuring heavily in the company’s Growth category.

Analyst Daniel Kim gave Baylin Technologies (Baylin Technologies Stock Quote, Chart: TSX:BYL) a 12-month target price of $5.75, representing a 36 per cent return on investment at the time of publication. The company’s latest quarterly earnings in early August reported a 60 per cent year-over-year revenue increase along with an EBITDA of $2.9 million compared to $0.4 million a year earlier.

Kim says Baylin’s growth prospects are strong.

“BYL continues to focus on network densification driven by its small cell/DAS/BSA business (TAM of US$8–US$40 billion),” he writes. “The division’s growth should continue to accelerate with renewed product development and strong industry dynamics favouring the densification of networks. Industry analysts estimate one million small cell antennas will be required to make 5G viable.”

“Cost synergies from BYL’s Advantech and Alga acquisitions should drive meaningful profit improvement this year and next. The stock continues to be inexpensive, trading 5.1x 2019e EV/EBITDA versus its peers at 9.8x,” says Kim.

Enterprise fleet communications company Siyata Mobile (Siyata Mobile Stock Quote, Chart TSXV:SIM) also got the nod from Kim with a target price of $0.70, representing a 43 per cent return at the time of publication.

“SIM has officially signed a Master Supply Agreement with a tier-1 Canadian carrier for its flagship UV350 device. This is the big catalyst we were waiting for and a great de-risking event for SIM. We expect launch with tier-1 US carriers will occur in Q4,” says Kim.

“SIM is a leading candidate for first-responder vehicles migrating to the FirstNet Network,” he says. “This opportunity is far bigger than previously thought, as it includes a far wider range of vehicles. This increases the TAM from 1M vehicles to 2–3M. SIM continues to be inexpensive, trading at 6.4x 2019e EV/EBITDA versus its peers at 11.7x.”

Analyst Kevin Krishnaratne gave e-commerce company Shopify (Shopify Stock Quote, Chart TSX, NYSE:SHOP) top pick status and what in his words is a conservative price target of US$170, representing a projected return of 4 per cent at the time of publication.

“Shopify is in the very early stages of disrupting retail, with +650,000 customers on its platform and revenue and gross profits growing ~60 per cent,” Krishnaratne says.

“Trends should continue to benefit from recent initiatives, such as Shipping, International, Plus and new channel launches.”

“Our view is that estimates are very conservative, with multiple ways for Shopify to beat and raise guidance. In turn, our current US$170.00 target, which is based on 10.3x 2019/2020e EV/Sales, likely also has room for upward revisions on the back of earnings events and new product releases,” he says.

Finally, Paradigm’s Rahul Sarugaser gave cannabis sector play Tetra Bio-Pharma (Tetra Bio-Pharma Stock Quote, Chart TSXV:TBP) a $1.75 target, representing a projected return of 47 per cent at the time of publication.

“In Q4, we anticipate TBP achieving multiple milestones associated with its four clinical trials. Phase 3: terminal cancer pain; Phase 2: breakthrough cancer pain; Phase 2/4: chronic pain; and Phase 1: fibromyalgia pain. Each milestone unlocks more of each clinical program’s intrinsic value,” the analyst says.

“We see TBP’s pursuit of pre-marketing applications with the European Medicines Agency as particularly material: an application submitted this fall has the potential to win the company EMA approvals in Q3/19, which could create up to $350 million in additional value,” he says.