Making sense of the markets this week: February 19, 2023

If you’re a “glass is half full”-type shareholder, you’re pleased to see the company announce profits, which is not a given for the tech giant. Shopify president Harley Finkelstein highlighted the Shopify Fulfilment Network and Deliverr as strategic verticals in the company to watch in 2023. You might also be happy at the 45% year-to-date returns, the 21% year-on-year revenue growth in 2022, and the positive momentum building on Q3 results.

It appears there are a lot more “half-empty” tech investors these days. They’re quick to fixate upon Finkelstein’s less enthusiastic statements about Shopify’s future, such as…

“Additionally, while our financial outlook assumes that the COVID-triggered acceleration of e-commerce continues to return to a more normalized rate of growth in 2023, there is elevated inflation and continued caution around consumer spending due to a variety of macroeconomic factors.”

So far, it has been a solid quarter for Canadian tech companies, as they seek to bounce back from a really tough 2022. With Open Text and Lightspeed posting solid results, it’s up to Constellation Software to keep moving the trend when it announces earnings in a couple of weeks.
If you’re looking for a Canadian tech ETF with exposure to these names, the iShares S&P/TSX Capped Information Technology Index ETF (XIT) takes a diversified approach to the sector. While Shopify does make up about 27% of the ETF’s holdings, it would make up substantially more if the capped ETF were just a pure market-weighted index ETF. Shopify’s $90 billion market cap nearly doubles second-place Constellation, and it is roughly seven times larger than Open Text’s $13 billion. For more, you can read this article on Canadian tech stocks at Million Dollar Journey.

Don’t travellers know we’re supposed to be in a recession?

Everyone’s talking about how bad the economy is and how we must already be in a recession. Yet, someone forgot to tell Uber and Airbnb. Looking at their income statements, there’s no sign we’re in hard times.

Travel and transport earnings highlights

All reported in U.S. currency.

  • Uber (UBER/NYSE): Earnings per share of $0.29 (versus -$0.18 predicted) and revenues of $8.6 billion (versus $8.49 billion predicted). 
  • Lyft (LYFT/NASDAQ): Earnings per share of $0.29 (versus $0.13 predicted) and revenues of $1.18 billion (versus $1.16 billion predicted).
  • Airbnb (ABNB/NASDAQ): Earnings per share of $0.48 (versus $0.25 predicted) and revenues of $1.90 billion (versus $1.86 billion predicted).

Admittedly, things weren’t so rosy for Lyft. Even as the rideshare company posted a slight increase on earnings, the stock was down 30% in after-hours trading, due to weak revenue guidance (meaning they’re not predicting a sudden increase in paying customers anytime soon). Lyft appears to have plateaued, as rider numbers are still significantly below pre-pandemic levels.

Uber, however, reported a great fourth quarter, and the stock price was up 9% in after-hours trading. The company also announced that, unlike many other tech companies, it would “continue hiring at a judicious pace in 2023.” Proving that it can do more with less: Uber’s headcount is down 5%, while revenues are up 75% relative to 2019.

Anecdotally, as someone who’s travelled using Airbnb’s services several times over the past year, I wasn’t surprised to hear how well it’s doing. Property owners have definitely noticed demand for their dwellings. And I’ve not experienced any “recessionary price pressure” at the places I’ve looked at and stayed. Airbnb confirmed my hunch when the company released that daily prices on their listings were down only 1% from the summer quarter, and were clinging to the $153-per-night price point. Listings were up 16% in 2022.

Will the world’s economies grow in 2023?

Recently, the Visual Capitalist took a look at growth forecasts around the world this year. Notably, the world is projected to see 2.9% gross domestic product (GDP) growth in 2023, while Canada is expected to come in around 1.5%. 


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