There’s not a whole lot going on in the markets in 2023. Stocks rallied to start off the year, but have since given up much of their gains. It’s been a lukewarm market for the most part. However, there have been some exceptions. In sectors like technology and banking, we’ve seen developments like new mergers, new products, and personnel changes. In this article, I will explore two Canadian stocks prepped to have a big year in 2023.
Shopify
Shopify Inc (TSX:SHOP) is one Canadian tech stock that will have a big year in 2023 no matter what. By “big” I mean eventful, not necessarily “good.” SHOP is exposed to many major risk factors, including an ongoing bear market in technology stocks, rising interest rates, and a slowdown in growth compared to 2020/2021 levels. The COVID-19 pandemic was a huge boon to Shopify, because the closure of retail stores led to an increase in people shopping online. In 2020, Shopify’s revenue grew by 86%. It was an incredible year for the company.
Unfortunately, things deteriorated pretty quickly after COVID-19 lockdowns ended. Starting in 2022, SHOP’s revenue growth slipped from 86% to the mid-teens. The stock was previously valued on the assumption of high double digit growth continuing indefinitely, so it abruptly crashed when growth slowed down. In its most recent quarter, SHOP’s growth picked back up again, reaching 26%. That’s pretty good, but not quite what SHOP was known for in the past.
This year will be a big one for SHOP because we’ll get to see whether the company’s price hikes succeed in ramping up its revenue growth. A few months ago, Shopify announced that it would be increasing the prices of all of its paid plans. The stock rallied 10% in a single day due to this move. Later, it gave up the gains when its fourth quarter earnings release failed to impress. However, that earnings release covered a period from before the price hikes, so we could see big things in the next quarterly release, which will include an impact from the price hikes.
Bank of Montreal
The Bank of Montreal (TSX:BMO) is a Canadian bank stock that’s in the process of closing its deal to buy Bank of the West from BNP Paribas, a major European bank. Bank of the West is a big U.S. bank situated in California. The Bank of Montreal is paying $13.4 billion to buy it out. For that amount, it will receive US$100 billion in new assets. I’ve written about TD Bank’s First Horizon deal extensively in my past articles. That deal will be a big catalyst if it closes, but there are concerns that it won’t actually close. U.S. regulators keep pushing the closing date further out, refusing to give all the approvals needed. BMO, on the other hand, has already closed its Bank of the West deal. So, Bank of the West’s earnings will start showing up in BMO’s quarterly releases as soon as next quarter.
Foolish takeaway
2023 is looking like a boring year in the markets. On the whole, I would say it looks less exciting than the previous two years. That doesn’t mean there aren’t pockets of the market in which interesting things are happening, though. From tech to banking, many Canadian companies are doing interesting things.
