The TSX Composite benchmark has seen a strong rally in the last few months, as investors believe that the central banks in the United States and Canada are set to slash interest rates on multiple occasions in 2024. Expectations that a reduced interest rate environment will ultimately benefit most businesses have driven many Canadian growth stocks sharply higher of late. Despite their recent rally, however, there are still some hidden gems that offer great growth potential and attractive valuations, making them worth buying now to hold for the long term.
Let’s take a closer look at two such top growth stocks in Canada that you can consider adding to your portfolio in February 2024.
Lightspeed stock
Lightspeed Commerce (TSX:LSPD) is my first Canadian growth stock pick for February 2024. After declining by 78% in the previous two years, LSPD stock recovered around 44% in 2023 with the help of a sharp rally in its share prices in the December 2023 quarter. As a result, the stock currently trades at $25.36 per share with about $3.9 billion in market capitalization.
Macroeconomic uncertainties have made small- and medium-sized businesses across the globe trim their expenses, but the demand for LSPD’s one-stop commerce platform has remained largely stable. This is one of the key reasons why the company’s total revenue in the first half (ended in September) of its fiscal year 2024 jumped roughly 23% YoY (year over year) to US$439.4 million. Strong performance in its retail and restaurant offerings and the success of its unified payments initiative also helped the company post US$0.03 per share in adjusted earnings in the six months compared to an adjusted net loss of US$0.17 per share during the same period of its previous fiscal year.
As the economic outlook gradually improves in the years to come with expectations of reduced interest rates, the demand for Lightspeed’s services could also increase and help its financial growth trend accelerate. These positive factors should help LSPD stock continue recovering.
Shopify stock
Shopify (TSX:SHOP) could be another top Canadian growth stock you can consider buying in February. The Ottawa-based e-commerce platform giant currently has a market cap of $141.7 billion as its stock trades at $110.33 per share with nearly 7% year-to-date gains.
In the first three quarters of 2023, Shopify’s total revenue jumped 27.2% YoY to US$4.9 billion, with consistent expansion in its gross merchandise volume and gross profit. With this, the company reported adjusted earnings of US$0.39 per share for these nine months compared to an adjusted net loss of US$0.03 per share in the same nine months of 2022.
After skyrocketing by nearly 4,792% in the previous six years, SHOP stock witnessed a steep 73% downside correction in 2022 after rapidly rising interest rates badly affected investors’ sentiments, leading to a massive selloff in tech stocks. Although its share prices staged a handsome recovery in 2023 by more than doubling in value, they’re still down around 50% from their all-time highs. Given its strong financials and fundamental outlook, Shopify stock has the potential to continue rallying in the years to come.
