It’s hard to argue with success. All around, 2021 has been pretty outstanding for Canadian stocks, although some sectors have fared better than others. For example, the overall S&P/TSX Composite Index is up about 21 per cent year-to-date but the S&P/TSX Energy Capped Index is up a huge 79 per cent while the Consumer Staples Index is up 14 per cent and Utilities is up just three per cent.
Where do Canadian tech companies fit in? Pretty much right up the middle. The TSX Capped Information Technology Index, composed of 24 names from Canada’s tech sector, is currently up about 24 per cent for the year. Meanwhile, for healthcare stocks the news is less rosy, at least from the TSX Capped Health Care Index which has only nine constituents (five of which are cannabis companies) that index is down 12 per cent.
But there’s plenty of promise for December and for the year ahead, and investors searching for ideas for stock trading and buying in tech and health care have a boatload of options. Here are ten top Canadian stocks, all with recent Buy ratings from analysts.
Shopify (Shopify Stock Quote, Charts, News, Analysts, Financials TSX:SHOP)
- Market Capitalization: $251 billion
- Year-to-date return: +42 per cent
- Projected 12-month return: 36.8 per cent (Note: all projected returns are as of the publication date of the indicated analyst’s report and all figures in Canadian dollars except where noted otherwise.)
The big daddy of the Canadian tech scene, e-commerce platform Shopify continues to leave any and all skeptics red-faced with FOMO. The stock has done extremely well during the pandemic (and before), as commerce increasingly goes online and retailers the world over turn to SHOP’s platform to sell their wares.
How will 2022 look for the company? Likely more of the same, says National Bank Financial analyst Richard Tse, who last month reiterated his “Outperform” rating for the stock and gave it a US$2,000 target. Looking at Shopify’s most recent quarterly financials, Tse said while the numbers were a little lighter than expected, SHOP’s demonstrated ability to diversify its set of customer offerings will continue to be a growth driver.
“In our view, Shopify remains a leading disruptor and we believe upside in the stock will come from organic growth via incremental growth drivers like International, new Merchant Services like SFN, Shopify Plus (larger enterprises), Shop, Shop Pay, expanding channel partnerships (like Facebook and Google) and now POS Pro for brick-and-mortar retail,” Tse said in an October 28 report to clients.
Air Canada (Air Canada Stock Quote, Charts, News, Analysts, Financials TSX:AC)
- Market Cap: $7.6 billion
- Year-to-date return: -9 per cent
- Projected 12-month return: 20 per cent
It’s an understatement to say that the past two years have been bumpy for Air Canada and the rest of the airlines. Essentially shut down for a good chunk of 2020 and still hobbled this year with wave after wave of COVID concerns continuing to have their way with the industry.
Air Canada’s share price cratered early on in 2020 and while the stock was rising over much of this year, the emergence of a new COVID variant has brought a fresh set of worries about air travel and put a damper on AC’s recovery, making it one of a number of TSX stocks whose future remains tightly linked to COVID.
But investors should recall that up until the pandemic hit, Air Canada was the epitome of a well-functioning, profitable business, generating record revenues and expanding its operations. And so, while COVID continues to dominate for the foreseeable future, there will be an end, and Air Canada could take up where it left off.
On AC’s post-pandemic return, Paradigm Capital analyst Corey Hammill said the company isn’t out of the woods yet but investors should be betting on Air Canada to come out strong on the other side.
“We remain cautiously optimistic in our long-term outlook for Air Canada. The airline has been rebuilt to withstand the shocks that it has faced over the past year and a half, and will likely have to continue to navigate near-term bumps in the recovery. Given the duration of the expected recovery, we are using 2023 estimates to set our target price, giving us a long-term beacon,” Hammill wrote in a November 3 research report.
“Long term, we remain confident in Air Canada’s standing as a leading global airline,” he said.
Lightspeed Commerce (Lightspeed Commerce Stock Quote, Charts, News, Analysts, Financials TSX:LSPD)
- Market Cap: $10.1 billion
- Year-to-date return: -28 per cent
- Projected 12-month return: 125 per cent
Lightspeed’s year was going quite well, with the stock up by over half until the wheels came off this growth stock in September. A short report alleged that Lightspeed, which provides point-of-sale and payment processing solutions for small and medium-sized businesses, had been inflating both its customer numbers, financials and growth outlook. That promptly dropped LSPD by about 30 per cent but then came a poorly-received quarterly earnings report and now the stock is under water, with the market seemingly staying very trigger-happy about the company.
National Bank’s Tse recently wrote about Lightspeed’s travails, saying the market overhang from the short report is likely to persist for a while yet, but for investors who can look past the current drama, Tse still sees a long growth runway ahead. The analyst maintained his “Outperform” rating and US$120 per share target in a November 23 update.
“In the short term, we believe the stock will be subject to continued pressure given the absence of catalysts,” Tse said. “But for those with a longer time horizon, we believe the current stock price represents an opportunity.”
Organigram Holdings (Organigram Stock Quote, Charts, News, Analysts, Financials TSX:OGI)
- Market Cap: $770 million
- Year-to-date return: +49 per cent
- Projected 12-month return: 111 per cent
The cannabis sector started out 2021 with a lot of promise in North America, as a new administration in the US brought fresh hopes of legalizing weed at the federal level and here in Canada an improved year in 2020 made it seem like the industry was finally putting its growing pains behind it. And while US legalization hasn’t quite gone up in … ahem, smoke, there seems to be less certainty now that movement on that file will come any time soon.
As for the Canadian companies, let’s just say they’re a work in progress. Revenues have not increased as expected for the more well-known, larger players and losses persist, causing a number of companies to scale back their organizations and shutter facilities. Competition is also strengthening, with some smaller, more nimble businesses in the craft product and edibles markets starting to take market share away from the bigs.
Enter Organigram Holdings, the Moncton, New Brunswick-based greenhouse grower which is trying to get back on its feet after a tough year-and-a-half of COVID-induced production woes. The stock rose sharply on the Toronto Stock Exchange over the first stretch of 2021 and while it has been on a prolonged pullback ever since, it looks like OGI could still finish the year well in the black if things go relatively smoothly through December.
For a 2022 outlook, Raymond James analyst Rahul Sarugaser thinks Organigram is poised to gain market share and to take advantage of higher-margin segments of the cannabis trade. In a company brief on November 23, Sarugaser maintained his “Outperform 2” rating and $5.00 target price, saying the company is already showing improved operational efficiencies which it should keep up in the new year.
“We applaud OGI’s rapid return to form, and for 2022, anticipate OGI’s revenue rapidly catching—and overtaking—that of Canopy Growth, which presently occupies the #3 national market share position,” Sarugaser said.
“We now watch for OGI’s return to full-capacity operation (along with capacity expansions), careful price increases, and its entry into more profitable categories (e.g. gummies, wellness, premium cannabis) to widen these margins,” he wrote.
WELL Health Technologies (WELL Health Technologies Stock Quote, Charts, News, Analysts, Financials TSX:WELL)
- Market Cap: $1.2 billion
- Year-to-date return: -31 per cent
- Projected 12-month return: 123 per cent
A huge climber in 2020, Vancouver-based digital healthcare company WELL Health caught investor attention over the pandemic with its virtual platforms, both in Canada and the US, for physician consultations and growing stable of tech-enabled healthcare offerings. But this year has proved to be a different story, with the stock now down by a third even as the company continues to grow both organically and through acquisition.
WELL has gone from $50 million in revenue last year to close to $300 million when this year closes, and that growth is likely to continue into 2022, according to Eight Capital analyst Christian Sgro, who likes the look of WELL even in the digital health space which has been beat up of late.
“We expect [WELL Health’s] decentralized approach to capital allocation to drive accretive M&A growth across all business units as the organic growth story comes more into focus. With the additional capital, we believe the company can continue adding scale under all banners while identifying cross-border and cross-sell opportunities to expand reach,” wrote Sgro in a November 25 comment to clients.
“Despite recent weakness across the sector, we believe the potential for continued M&A and achievement of near-term organic growth objectives can drive strong fundamental performance,” he said.
With the update, Sgro reiterated his “Buy” rating on WELL and $13.00 target price.
Quipt Home Medical (Quipt Home Medical Stock Quote, Charts, News, Analysts, Financials TSXV:QIPT)
- Market Cap: $266 million
- Year-to-date return: +23 per cent
- Projected 12-month return: 91 per cent
US-focused Quipt Home Medical is in the in-home patient monitoring and disease management space and offers end-to-end respiratory services across the country. The company went about a transformation this year and last, rebranding itself and completing a share consolidation as well as a NASDAQ listing and has been busy consolidating in a fragmented industry of companies serving chronically ill patients with multiple disease states. Earlier in November, Quipt announced a letter of intent to acquire a company with 15,000 active patients and a trailing 12 months revenue of US$13 million at 20 per cent EBITDA, which would bring QIPT’s patient count to 170,000. That’s up from 91,650 patients at the end of 2020.
One analyst who likes Quipt’s trajectory is Beacon Securities’ Doug Cooper, who recently reported on the company in a November 17 update and reiterated his “Buy” rating and $15.50 target price. Cooper said Quipt has been growing faster than the industry average and has been gaining market share versus its smaller competitors. And with its strong execution of late and strong balance sheet, Cooper sees lots of upside in store for QIPT.
“It took QIPT a better part of a decade to reach US$100 million [in revenue] this year. Its target implies it will reach US$200 million within another two years. We believe the market should recognize that QIPT has a history of execution and achieving its targets, most notably its target set earlier this year of exiting 2021 at a run-rate of US$130 million in revenue. With its already announced acquisitions and LOI, we believe it will exit this calendar year north of that level,” Cooper wrote.
Nanalysis Scientific (Nanalysis Scientific Stock Quote, Charts, News, Analysts, Financials TSX:NSCI)
- Market Cap: $115 million
- Year-to-date return: +203 per cent
- Projected 12-month return: 89 per cent
Nanalysis Scientific has certainly been trending in the right direction. The stock started jumping in late May this year and hasn’t looked back, standing at a triple with one month to go. The company, which designs and manufactures compact nuclear magnetic resonance spectrometers and MR imaging equipment, has seen nice growth in its business. Recently reporting its third quarter, Nanalysis showed a 96 per cent year-over-year increase in revenue to $3.4 million and break-even EBITDA.
But the good times aren’t over for NSCI, according to Echelon Capital Markets analyst Stefan Quenneville, who reiterated his “Buy” rating and $3.10 per share target in an update on November 19. Quenneville said while supply chain issues as well as capacity expansion efforts were dragging on the company over the recent quarter, strong demand for its products should keep the company and investors happy going forward.
“With these production issues largely resolved heading into 2022 as demand for the company’s portable NMR instruments remains high, as evidenced by the 100 MHz sales backlog growing to 29 units, we expect the company to remain on its impressive growth trajectory and continue to view it as meaningfully undervalued relative to peers,” said Quenneville in his report.
Auxly Cannabis (Stock Quote, Charts, News, Analysts, Financials TSX
- Market Cap: $188 million
- Year-to-date return: -12 per cent
- Projected 12-month return: 67 per cent
Another Canadian cannabis name that’s showing a lot of promise is Toronto-based Auxly Cannabis, a consumer packaged goods (CPG) business focusing on the Cannabis 2.0 and derivatives that has been punching above its weight when it comes to market share in the edibles business and with brands including Dosecann, Kolab and Foray along with a supply agreement with Shoppers Drug Mart and a major investor in UK tobacco giant Imperial Brands, Auxly should check a lot of boxes for investors.
The stock has been mired in the broader cannabis slump this year, but ATB Capital Markets analyst Frederico Gomes sees room to grow for Auxly, especially after the company just acquired the remaining 55 per cent equity interest in Sunens Farms, the greenhouse growing joint venture Auxly formerly held with Peter Quiring, which has a production capacity of 100,000 kgs per year.
Gomes commented on the JV buyout in a report to clients on November 22 where he reiterated his “Outperform” rating for XLY and $0.45 per share target price.
“We view the transaction as positive from a financial and strategic standpoint. Financially, margins may benefit as cost of goods decline through a vertically-integrated platform. Strategically, the full ownership of cultivation assets grants Auxly better control of its destiny with a secure source of supply. Despite our positive view of the transaction and what it could mean for the Company’s long-term growth outlook, for now, we maintain our previously-published estimates unchanged considering the volatility and lack of near-term visibility in the Canadian cannabis market,” Gomes wrote.
Rivalry Corp (Rivalry Corp Stock Quote, Charts, News, Analysts, Financials TSXV:RVLY)
- Market Cap: $117 million
- Year-to-date return: -44 per cent
- Projected 12-month return: 55 per cent
Another Venture Exchange name, Rivalry owns and runs a sports betting, online casino and media platform with a focus on Milennial and GenZ customers and involving esports as a central component. The company closed on US$22 million in subscription receipt financing earlier this year to pave the way for it to begin trading in early October, where so far the stock has tracked downward.
Eight Capital initiated coverage of the stock in early November, with analyst Adhir Kadve saying Rivalry’s targeting of the under 30 crowd is going to pay dividends.
“Rivalry aims to create true product differentiation by focusing on a user experience catered to this incredibly valuable demographic and building brand affinity with them, with the ultimate goal to cross-sell them from esports into their other product offerings such as traditional sports betting and casino offerings. In our view, Rivalry offers investors exposure to the growth of both esports and traditional sports betting in both regulated and grey markets globally,” Kadve said.
The analyst started Rivalry off with a “Buy” rating and $4.00 target price, which he later reiterated in a November 25 report, saying the company is off to a strong start after delivering positive quarterly earnings.
NervGen Pharma (NervGen Pharma Stock Quote, Charts, News, Analysts, Financials TSXV:NGEN)
- Market Cap: $136 million
- Year-to-date return: +30 per cent
- Projected 12-month return: 115 per cent
Finally, from the biopharmaceutical space is NervGen Pharma, which has a clinical-stage lead asset in NVG-291, currently being developed for spinal cord injury, multiple sclerosis and Alzheimer’s disease. The company recently delivered interim results from a Phase 1 trial in six cohorts of healthy adults dosed with NVG-291 or placebo, reporting all adverse events to be mild and transient and no observed effect on vital signs, ECGs or lab assessments.
Commenting on NervGen in a November 18 update, iA Capital Markets analyst Chelsea Stellick said the pharmacokinetic signals are suggesting that NVG-291 has a more favourable profile in humans than in rodents, all else being equal, and that the already observed “profound effect” the drug has been observed to have on rodents make for promising prospects for NVG-291 in humans.
Stellick said 2022 should be a catalyst-rich time for the company and stock.
We are impressed with the progress NGEN has made thus far and look forward to completion of the Phase 1 trial and initiation of new clinical trials in 2022,” said Stellick in her report, where she reiterated a “Speculative Buy” rating and $6.00 target price.
Disclaimer: Nick Waddell and Jayson MacLean own shares in WELL Health Technologies and WELL is an annual sponsor of Cantech Letter.