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The current economic situation has been very challenging for most growth stocks globally. Factors like rising global geopolitical tensions, high inflation levels, and pandemic-related disruptions have significantly hampered their performance. However, some stocks have proven their worth in the past and have the potential to go big once the macro factors sort themselves out. In this article, we will discuss three of the best TSX growth stocks that have historically outperformed the market and are worth keeping an eye on in September 2022.
TSX Growth stocks to watch
Top 3 TSX Growth Stocks to Watch Out for in September 2022
Nuvei is a Montreal-based global payments technology company that provides businesses with pay-in and payout options like card issuing, banking, and risk and fraud management services. The fintech player has an impressive client base catering to over 50,000 B2B clients, hailing from several industries and about 204 global markets, and big names like Gucci and WestJet in its clientele.
Since debuting in September 2020, Nuvei has witnessed unprecedented growth benefitting from the developments in e-commerce volumes during the pandemic. However, these volumes have started slowing down with the re-opening of the economy. The TSX growth stock has suffered and is currently down almost 75% from its September 2021 levels. On top of that, due to its involvement in Ponzi schemes, it also had to face the wrath of short-seller Spruce Point Capital, negatively impacting its valuation.
Nuvei has a great business model and still has a huge market to address. As per the Payment Gateway Market Research, 2030, the global payment gateway market would reach $98.2 billion by 2030 from $22.4 billion in 2021, growing at a CAGR of 17.7% between 2022 to 2030. Moreover, in the second quarter of this year, it reported a 19% year-over-year growth driven by a 38% increment in its volume levels.
In the near times, Nuvei’s management is expecting decent financial growth. The company operates in multiple other verticals like online gaming, financial services, digital products, and cryptocurrencies. It is projected that these segments’ revenue base will increase by 30% in the long term. Besides, this also confirms that even if its main business from the payment platform underperforms, the company will be able to compensate for that loss from the benefits it will be earning from the volume surges in those other segments.
The looming fear of recession can affect its value in the near times. Still, its potential to grow in the economic recovery is intact.
The TSX growth stock closed at $32.67 on August 30, and the average analyst price for Nuvei is $92.36, a potential upside of over 132%.
Shopify is an Ottawa-based multinational e-commerce company with a proprietary platform offering online stores and retail point-of-sale systems. It helps takes businesses online very quickly. It started with small businesses, but its services are used by some of the biggest brands in the world today.
Shopify stock was one of the brightest stars during the pandemic era. However, the TSX growth stock is now almost 80% down from the all-time highs that it had attained last November as the volume of e-commerce transactions lowered during the post-lockdown era.
However, even now, the company has a vast market opportunity. During its IPO in 2015, Shopify used to serve 162,261 businesses, but now the number has reached millions. As it enables merchants to grow their online presence without joining crowded third-party marketplaces like Amazon and eBay. The growth of the e-commerce industry can provide exponential growth to Shopify in the near times. Besides, over the years, the company has also expanded its niche market into a mainstream one, ensuring increased cash inflow streams.
Between 2015 and 2021, Shopify’s revenues have grown from $205 million to $4.61 billion, growing at a CAGR of 68%, and based on GAAP; it has been generating profits as well. The market believes the company will be able to tap a more extensive customer base owing to its advanced integrated Shop Pay payments system, dedicated fulfillment network, and own point-of-sale (POS) system.
However, the company’s growth has slowed as the pandemic-era tailwinds have faded, and this slowdown is still ongoing. Because of the higher proportion of revenue from its lower-margin Merchant Solutions segments, the gross margin rates have decreased. Moreover, the resulting operating margins have also decreased with the increase in logistics, R&D, data, sales, and marketing investments. While revenues are still growing, the slower growth in the e-commerce sector indicates that Shopify’s hypergrowth era has passed. Even so, investors can expect it to outperform the market soon.
The TSX growth stock closed at $41.09 on August 30, and the average target price for Shopify is $56.34, which is a potential upside of just over 37%.
Aritzia is a Vancouver-based women’s fashion brand that sells a variety of lifestyle apparel and accessories through multiple retail stores across Canada and the United States. The company mainly caters to women and sells its products under brands like the Wilfred, Super World, Babaton, and TNA brands.
Aritzia has done a tremendous job building its clothing brand in the Canadian market and is currently gaining strong traction in the US. Its consistency in providing high-quality clothing while simultaneously outperforming the market’s expectations has given the company some significant recognition. Moreover, it has been increasing its focus on expanding in the US retail market and accelerating the pace of expansion of the men’s fashion segment since last year.
The TSX growth stock is almost 20% down year to date. Aritzia’s latest financials for the first quarter of the Fiscal year 2023 state its revenue has increased to $407.9 million depicting a 65.2% YoY gain and an 84.2% YoY jump in its adjusted earnings for the quarter to $0.35 per share. Notably, a solid 81% surge in sales from the US region was noticed during the quarter.
The current market trend further suggests the company will be able to keep up with this positive trend even in the next couple of years. Although it might continue facing challenges from factors like global supply chain disruptions for some time, as the company has been managing its inventory and logistics operations remarkably, it can benefit significantly from the upcoming sales growth trends. Aritzia stock closed at $42.64 on August 30, and the average analyst price target is $57.29, a potential upside of over 37%.
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