Keep riding Shopify’s hot streak, this analyst says

Canada’s technology sector is kicking it over the first stretch of the year, led by e-commerce company Shopify (Shopify Stock Quote, Chart TSX:SHOP), whose wildly swinging stock is now hitting new highs. By the looks of it, there’s more upside to come, says analyst and Jon Vialoux of CastleMoore Investment Counselling & Portfolio Management.

“The technology sector in Canada has been tremendous. It’s been one of the few gainers over the past year,” says Vialoux, to BNN Bloomberg on Friday. “Energy is down, financial has been horrible, so technology has really been the place to be, and that’s really been reflected in some of the economic data we’ve seen, too.”

“The technology components of the GDP have been trending quite higher and it’s been helping up mitigate weakness in the manufacturing side of the economy. Technology has been doing quite well and Shopify is reflecting that,” he says.

Ahead of Shopify’s fiscal fourth quarter 2018 financials due tomorrow, the Ottawa-based company is flying high in 2019, up 26 per cent year-to-date and leading a list of tech gainers which includes names like Descartes Systems, OpenText and CGI Group, who have rallied strongly after a weak quarter to end 2018.

“[Shopify] is certainly a volatile stock,” says Vialoux. “It’s starting to break above a level of resistance overhead. We saw this with CGI Group, as well. These are encouraging signs if we’re seeing a stock constantly chart new 52-week highs even after consolidating.

“When you have a stock that’s consolidating like that, the magnitude of the range is what you would project to the upside. [Shopify’s] range was about C$162 to C$220, so take that magnitude and project it to the upside and that would be your theoretical target,” he says.

“A stock that is still charting new highs is theoretically a positive trend, so you want to continue holding this thing, even though the volatility is just crazy,” he says.

Shopify’s last reported earnings came in late October when the company’s third quarter beat the consensus expectation on revenue, posting a top line of $270.1 million, a 58 per cent year-over-year increase and ahead of the $255 million estimate. (All figures in US dollars unless otherwise noted.) SHOP’s operating loss came in at $31.4 million, which was more than the consensus estimate of $24.4 million. Management guidance predicted year-end revenue of between $1.045 and $1.055 billion with an operating loss of between $95 million and $97 million.