They’ve got Amazon, Alphabet, Apple, Nvidia, Microsoft, and Meta. We’ve got Shopify, Celestica, Constellation Software, and Descartes Systems.
Guess what? We’re winning!
Well, perhaps that’s a bit of an overstatement. But our tech Davids are doing better than their tech Goliaths so far in 2025.
As of Feb. 14, the S&P/TSX Information Technology TTTK-I sub-index was ahead almost 13 per cent year-to-date. Only gold was doing better. Meanwhile, U.S. tech has hit a wall. The S&P 500 Information Technology Index SRIT-I is up 1.55 per cent for the same period.
Why have Canadian companies been doing so well? They’re certainly not cheap compared to their U.S. counterparts. Celestica is the least expensive among Canada’s big four, but it has a p/e ratio of 36.6. Constellation Software has a staggeringly high p/e of 125.
One thing the Canadian companies have going for them is a relatively low profile. Any negative development that impacts one of the big U.S. tech stocks is magnified by the intensive media coverage they receive. Canadian stocks tend to fly under the radar, with Shopify about the only one the U.S. media pays much attention to.
But the biggest plus in Canada’s favour is the basis of all stock valuations: good results. Our tech companies have been reporting strong earnings in recent months. That’s the best way to win investors’ hearts – and dollars.
Here are updates for four leading Canadian tech companies. All are recommendations of my Internet Wealth Builder newsletter. Prices are as of Feb. 14.
Celestica Inc.
Originally recommended on Nov. 20/23 at $38.46. Currently $187.37.
Ticker: CLS-T
Background: Toronto-based Celestica has two operating segments: Advanced Technology Solutions (ATS) and Connectivity & Cloud Solutions (CCS). The ATS segment consists of its Aerospace and Defense, Industrial, HealthTech and Capital Equipment businesses. The CCS segment consists of the company’s Communications and Enterprise (servers and storage) end markets.
Performance: After two strong years in a row, this has turned into a roller-coaster stock. It started the year strong, then fell 28 per cent on Jan. 27 when DeepSeek suddenly emerged from China to shake up the AI sector. CLS quickly recovered, however, rising to an all-time high of $206.57 earlier this month, before pulling back again. I advised my newsletter readers to take half profits on the stock after it doubled. This ensures they cannot lose money on this investment, whatever happens.
Recent developments: The company released fourth quarter and 2024 year-end results in late January. Revenue for the quarter was up 19 per cent to US$2.55-billion. Adjusted earnings per share were US$1.11, the highest quarterly EPS in the company’s history.
Full year revenue was US$9.65-billion, up from US$7.96-billion in 2023. Adjusted EPS was US$3.88 compared to US$2.46 in the prior year.
Dividend: The stock does not pay a dividend.
Outlook: Celestica expects revenue of US$10.7-billion in 2025, an increase from its previous outlook of US$10.4-billion. Adjusted EPS is forecast to be US$4.75, up from the previous outlook of US$4.42.
“Overall, the current demand environment for data centre hardware is robust, as evidenced by recent customer forecasts as well as new AI program awards over the last 90 days,” said CEO Rob Mionis. “As such, we believe the positive momentum we are experiencing will continue beyond this year, and into 2026.”
Comments: The big price swings the stock has experienced this year suggest investors are nervous about the short- to mid-term future. If President Trump’s across-the-board tariffs are implemented in March, Celestica’s hardware exports could be affected.
Action now: Hold. I do not recommend new purchases until the tariff issue becomes clearer.
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Shopify Inc.
Originally recommended on Feb. 22/16 at $2.83 (split-adjusted). Currently $181.92.
Ticker: SHOP-T
Background: Shopify is a cloud-based, multi-channel commerce platform designed for small and medium-sized businesses. Merchants use the software to design, set up and manage their stores across multiple sales channels, including web, mobile, social media, marketplaces, brick-and-mortar locations and pop-up stores. The company is based in Ottawa and is the largest company in the TSX information technology sub-index by market cap.
Performance: The stock is trading near its 52-week high.
Recent developments: Shopify recently reported fourth quarter and year-end 2024 results that beat analysts’ expectations. Revenue for the quarter was US$2.8-billion, up 31 per cent year-over-year. For the full 2024 fiscal year, the company reported revenue of almost US$8.9-billion, ahead 25 per cent from US$7.1-billion in 2023.
Net income was US$1.30-billion (99 US cents per diluted share), compared to US$657-million (51 US cents per share) in the fourth quarter of 2023. For the full 2024 fiscal year, Shopify reported earnings of just over US$2-billion (US$1.55 per share). That was a huge jump from US$132-million (10 US cents per share) in 2023.
Dividend: The stock does not pay a dividend.
Outlook: For the first quarter of 2025, the company expects revenue to grow in the mid-twenties percentage rate year-over-year and free cash flow margins in the mid-teens.
Action now: Buy.
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The Descartes Systems Group
Originally recommended on Oct. 30/17 at $37.83. Currently $165.19.
Ticker: DSG-T
Background: Descartes provides on-demand, software-as-a-service solutions focused on improving the productivity, performance and security of logistics-intensive businesses. Customers use its services to route, schedule, track and measure delivery resources; plan, allocate and execute shipments; rate, audit and pay transportation invoices; access global trade data; file customs and security documents for imports and exports; and complete numerous other logistics processes. The company’s headquarters are in Waterloo, Ontario.
Performance: We recommended taking half profits in March 2023 when the shares were trading at $103.27, giving us a gain of 173 per cent to that point. This means we have a guaranteed profit no matter what the stock does from here. The stock is up 337 per cent since the original recommendation.
The shares had continued to rise until Donald Trump decided to declare a trade war on just about everyone. The stock hit an all-time high of $177.98 earlier this month but has been slipping since. Investors worry that Trump’s tariffs and the retaliation from affected countries will reduce international trade, which is the main focus of Descartes’ business.
Recent developments: The company reported strong third quarter results, with big gains in both revenue and profits. Revenue was US$168.8-million, up 17 per cent from US$144.7-million in the third quarter of fiscal 2024. Net income was US$36.6-million, up 38 per cent from US$26.6-million in the third quarter of fiscal 2024. Diluted earnings per share were 42 US cents, up 35 per cent from 31 US cents the year before.
“The global trade landscape remains highly uncertain and complex for our customers, especially with potential upcoming changes to tariffs and sanctions and the resulting impact on trade,” said CEO Edward J. Ryan. “As always, our goal is to help our customers manage this complexity so that they can continue to focus on their core businesses.”
Dividend: The stock does not pay a dividend.
Outlook: Although the company has been doing well, tariff wars could reduce the volume of world trade, as happened after the U.S. passed the Smoot-Hawley Act in 1930. If we see a repeat of that, it could cut the company’s revenue and profits.
Action now: Hold.
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Constellation Software Inc.
Recommended on Feb. 12/24 at $3,732.08. Currently $4,934.84.
Ticker: CSU-T
Background: Constellation is a large tech company by Canadian standards with a market cap of about $103 billion. It was founded in 1995 to assemble a portfolio of vertical market software companies that had the potential to be leaders in their particular areas of expertise. The company has grown rapidly through a combination of acquisitions and organic growth and continues to apply the same formula.
Performance: The shares hit an all-time high of $4,980.70 earlier this month and are trading just below that level now. The stock is up 11.6 per cent year-to-date and shows a gain of 32 per cent since it was reinstated as a buy one year ago.
Recent developments: The company will report fourth quarter and year-end results on March 7. Third quarter numbers showed an increase in revenue but a drop in earnings.
Revenue for the quarter was US$2.5-billion compared to US$2.1-billion in the same quarter of 2023. That was up 20 per cent, but only 2 per cent was organic.
Net income attributable to common shareholders decreased 28 per cent to US$164-million (US$7.74 per diluted share) from US$227-million (US$10.70 per share) in Q3 2023. However, year-to-date earnings were up slightly.
Free cash flow was US$362-million compared to US$367-million for the same period in 2023.
Dividend: The stock pays a quarterly dividend of US$1 per share ($4 annually).
Acquisitions: The company said it made several acquisitions during the period at a total cost of $267 million.
Action now: Buy.
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Gordon Pape is editor and publisher of the Internet Wealth Builder and Income Investor newsletters.
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