AMC and GME Are Tumbling, But These TSX Stocks Could Still Make You a Millionaire

The meme stock frenzy has recently started showing its ugly side. Here are two TSX stocks that offer handsome growth potential.

| More on:

The meme stock frenzy has recently started showing its ugly side. Popular stocks like GameStop and AMC Entertainment have almost halved in value since last month. Interestingly, both these are still trading at sky-high levels as against last year. However, those who got in in May or June this year just because their neighbours suggested it, or because they were inspired by social media posts, could be sitting on enormous losses.

AMC and GME stocks slide

Very few entered the meme stock mania without understanding the underlying risks. The rally in most of these stocks was fueled by social media popularity and was not backed by fundamentals. The immense volatility risk was prominent, which very few paid attention to.

It makes sense to go after growth stocks if you have an aggressive risk appetite. Consider a top growth stock Shopify (TSX:SHOP)(NYSE:SHOP). It has been one of the top millionaire-maker stocks on the streets for years.

It has managed to grow its revenues by 67% compounded annually in the last five years. Notably, such a steep financial growth effectively seeped into its market performance as well.

SHOP stock has returned more than 110% on average since 2016. If you invested $25,000 in SHOP five years ago, you would have accumulated close to a million-dollar today.

Importantly, it still has a long way to go. It caters to just a small portion of small- and medium-sized businesses. For instance, Shopify earned total revenues of around US$3.4 billion last year, while its total addressable market is valued at US$153 billion, indicating a huge growth potential. After Amazon, it stands second with close to 9% market share in the U.S. retail e-commerce sales.

Shopify will likely continue its handsome growth in the future as well. Its growing merchant and product base should play well for its financial growth for the long term.

Are you really comfortable with the volatility?

Now, betting on high-growth stocks like Shopify is a better risk/reward proposition compared to GME or AMC stocks. Its growing addressable market and steep historical growth underline the long-term potential.

Another high-growth stock in the Canadian markets that offers a favourable risk/reward proposition is Constellation Software (TSX:CSU). It has returned 40% on average since 2011, way higher than the TSX Composite Index. Tech stocks generally deliver market-beating growth driven by their high-margin business models and growing markets.

Constellation Software’s unique business model has been behind its superior growth all these years. It purchases smaller tech companies that have a leadership position in their particular markets. Its client base includes commercial businesses as well as government and related parties. CSU’s net income has increased by 12%, compounded annually in the last decade.

Bottom line

It’s not prudent to expect that these two stocks will repeat historical performance in the future. However, they could still deliver superior growth driven by fundamentals. Growth stocks like SHOP or CSU will take relatively lesser time to build a handsome reserve for your later years. This is where taking a high risk can pay off.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool owns shares of and recommends Amazon, Constellation Software, and Shopify. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon, long January 2023 $1,140 calls on Shopify, short January 2022 $1,940 calls on Amazon, and short January 2023 $1,160 calls on Shopify. Fool contributor Vineet Kulkarni has no position in any of the stocks mentioned. 

More on Tech Stocks

A plant grows from coins.
Tech Stocks

3 Growth Stocks Wall Street Might Be Sleeping on, But I’m Not

Don’t miss your chance to load up on these three beaten-down stocks.

Read more »

think thought consider
Tech Stocks

Is CGI Stock a Buy Even With No Dividend Yield?

CGI stock may not have a dividend to speak of. But does that necessarily mean you should ignore this top…

Read more »

A robotic hand interacting with a visual AI touchscreen display.
Tech Stocks

Why Now Is the Time to Invest in Canadian AI Stocks

Are you looking for one of the most solid Canadian AI stocks out there? This one is probably your best…

Read more »

The letters AI glowing on a circuit board processor.
Tech Stocks

Why AI Stocks Should Be in Every Canadian Investor’s Portfolio

AI stocks continue to be one of the best options out there for long-term investing, especially when considering Canadian options.

Read more »

money goes up and down in balance
Tech Stocks

1 “Magnificent 7” Stock I’d Buy Over Nvidia Right Now

Here's why Meta Platforms stock is a better choice for Canadian investors compared to Nvidia in November 2024.

Read more »

A data center engineer works on a laptop at a server farm.
Tech Stocks

3 No-Brainer Data Centre Stocks to Buy With $500 Right Now

Data centres are going to be a huge growth opportunity in the next decade. And these are the top buys.

Read more »

The virtual button with the letters AI in a circle hovering above a keyboard, about to be clicked by a cursor.
Tech Stocks

Is OpenText Stock a Buy, Sell, or Hold for 2025?

OpenText stock has fallen in the last few years, but that could mean this top tech stock remains an undervalued…

Read more »

AI microchip
Tech Stocks

Celestica Stock: Buy, Sell, or Hold?

Celestica's stock price has rallied 950% in the last five years. Will the AI boom send it even higher in…

Read more »