Summary

• Tech stocks have been an investor favorite throughout the pandemic.
• The S&P/TSX Capped Information Technology index shows a year-to-date growth of over 35 per cent.
• Tech companies Shopify Inc and Nuvei Corporation showed increased demand and revenue during the pandemic times as more people sought digital services.

E-commerce and online service platforms have been a great support for people through the pandemic times. As the COVID-triggered lockdown forced people to grow accustomed to a homebody economy, digital service platforms like Shopify Inc (TSX:SHOP) and Nuvei Corporation (TSX:NVEI) are in much demand. Forced to shut down physical stores, merchants are shifting to a digital model to run their businesses. This is where omnichannel platforms like Shopify and payment services like Nuvei come into the picture.

The boost in e-commerce businesses amid the pandemic mirrored on the stock market, as tech stocks remained in demand among investors. While its rally stumbled a little during the sell-off in September, it still holds a year-to-date (YTD) growth of 35.55 per cent on the S&P/TSX Capped Information Technology index.

Shopify’s tug of war with the Royal Bank of Canada for the most valuable public company in the country has been going on for a while. It briefly held the coveted crown, before giving up to RBC and returning to its current second spot on the TSX. Its stocks have also been one of the success stories on the TSX through the critical times of COVID-19, recording a 137 per cent year-to-date increase. Nuvei Corporation, on the other hand, is the new kid on the block, having debuted on the TSX just last week. So far, it has shown good performance. Let’s take a closer look at these two tech stocks.

Nuvei Corporation (TSX:NVEI)
Current Stock Price: C$ 51.95

Payment technology company Nuvei Corporation made headlines in mid-September by raising US$ 700 million in its initial public offering (IPO). This was the largest market capitalization and dollar amount raised by a tech firm ever, as per the TMX Group. Since its debut on the Toronto Stock Exchange (TSX) on September 17, Nuvei stock price has climbed by about 15 per cent.

The pandemic-triggered lockdown lifestyle has boosted business for fintech companies like Nuvei. In times when withdrawing cash and going out shopping is difficult, online payments have become go-to option. Riding on this high demand, Nuvei Corporation has seen much profit. The company recorded a net income of US$ 13.9 million in its quarter ending 30 June 2020, a substantial increase from a loss of US$ 1.4 million in the same quarter in 2019. Its operating profit was US$ 15.7 million and its revenue was US$ 82.5 million in the latest quarter.

In August 2019, Nuvei Corporation acquired Europe-based payment company SafeCharge, which had a “material effect on the comparability” of its operational results. Nuvei noted in its latest financial statements that its adjusted EBITDA related to SafeCharge was US$ 3.2 million in the last twelve months (LTM) ending 30 June 2020.

Headquartered in Montreal, Nuvei Corporation employed 765 persons as of June 2020. The company pointed in its September prospectus that it is expecting 50 more employees to join the workforce once its Smart2Pay transaction is completed.

Nuvei Corporation currently has a market cap of C$ 2 billion. Its 10-day average trading volume is 342,899.

Shopify Inc (TSX:SHOP)
Current Stock Price: C$ 1,225.28

Shopify Inc, Canada’s favorite one-stop e-commerce platform, sailed through the coronavirus pandemic crisis in a red-hot streak. Since touching a low of C$ 458.52 amid the March market crash, its stock price has gained over 167 per cent in the last six months. It also recorded about 137 per cent year-to-date growth. Shopify share price hit its highest point this year on September 2, reaching C$ 1,487, but slumped during the tech sell-off in the second week of September. However, it has been picking up pace again, registering a seven per cent increase in the last one week.

Shopify Inc saw a total revenue of US$ 714 million in its second quarter ending 30 June 2020, up by a whopping 97 per cent year-over-year (YoY). Its revenue from the subscription solutions segment was up 28 per cent YoY, amounting to over US$ 196 million. This growth was primarily boosted by businesses seeking to sell their products online amid the pandemic-triggered lockdown of physical stores, Shopify pointed in its quarterly report. Its merchant solutions revenue, which was nearly US$ 518 million in Q2 2020, recorded a growth for the third quarter in a row.

The company’s adjusted gross profit grew 84 per cent YoY in Q2 2020, amounting to over US$ 381 million. Its adjusted operating income was over US$ 113 million, which was 16 per cent of the revenue in Q2 2020. This adjusted operating income, however, excludes an impairment charge of about US$ 31 million, which was a result of Shopify’s decision to shift to a remote model of working permanently.

Shopify ended its second quarter in June 2020 with US$ 4 billion in cash, cash equivalents and marketable securities. At the moment, the company has a market cap of C$ 137 billion.

Shopify announced in June 2020 that it supported over two million full-time jobs in 2019 across the world. Its subscription solutions segment hosts millions of businesses via its website, stores, pop-up stores, kiosks, social media networks, etc. Under its merchant solutions segments are add-on products such as Shopify Payments, Shopify Shipping and Shopify Capital.