The TSX Index was down 3.59% in the month of December, up 18.47% YTD and 18.47% over the past year. Canadian GDP was up 0.4% in the fourth quarter of 2024 and 0.50% for the full year; in the USA the GDP was up 1.4% for the fourth quarter and 2.90% for the full year. Canadian inflation rate was 2.70% annually in December 2024 and the US annual rate was 3.30% in December 2024. With this background, the following Table presents the highest and lowest performers for the month of December 2024.
The top performer of December was Well Health Tech (WELL) whose stock price rose 17% on the month, 81% year-to-date, and 81% from the year prior. The stock had been trending around the lows of $3 to $5 for part of 2024, until it broke out in late 2024 past $6.
WELL is a Canadian digital healthcare company specializing in primary healthcare services, electronic medical records (EMR) solutions, and telehealth services. It operates a few key segments, including: Canadian patient services, US patient services, and SaaS and tech services.
The significant run in its share price from the mid $4s to $7 from November 2024 can be attributed to strong earnings results, a 27% increase in sales, a 10% rise in Adjusted EBITDA, and management raised its guidance. It now trades at a 22X forward earnings multiple, forward analyst estimates call for strong sales and earnings growth, and overall, we continue to like its momentum.
The second-best performer of December was Aritzia (ATZ) whose stock price was up 15% on the month, up 97% year-to-date, and 97% over the past year.
ATZ is a Canadian fashion retailer renowned for its women’s apparel and accessories. It has over 100 stores across North America and operates a global e-commerce platform. ATZ’s share price faced some challenges in 2023, as shares declined over 50% in the year, but have since come roaring back to life amid strong earnings results and an improved outlook.
Optimism surrounding its results in January led to its rise in share price in the month of December, and following inventory issues it faced a few years ago, ATZ has staged an impressive turnaround. Both its retail and e-commerce channels are showing impressive growth, and it is beginning to increase its presence in the US market by opening new stores. Analysts have been raising their share price targets, and we continue to like the name here.
The third-best performer of December was CAE (CAE) whose stock price was up 11% on the month, up 29% year-to-date, and up 29% over the past year.
CAE Inc. (CAE) was initially incorporated as Canadian Aviation Electronics Inc. CAE acts as a technology company which provides software-based simulation training and critical operations support solutions to pilots, cabin crew, airlines, defense and security forces. The company has more than 13,000 employees in approximately 250 sites and training locations in over 40 countries.
The stock has been consolidating between a wide range of around $15 to $40 over the past several years, but it appears to have recently broken out of this with recently strong results in November 2024. In the most recent quarter, its reputation and ability to win contracts was on display with significant order intake across both its segments. While there are some near-term headwinds that may affect growth in Civil Aviation, the long-term story there is still positive, while its Defense segments has numerous tailwinds. Execution has been a major issue that as hampered the stock’s performance in recent years. The most recent quarterly results showed progress, and the stock has since seen multiple expansion. We would like to see continued momentum in this name to validate that it is beginning to break out.
The third-worst performer of the month was EQB (EQB) whose stock price was down 12% on the month, up 15% year-to-date, and up 15% over the past year.
EQB operates through its subsidiaries, Equitable Bank, EQ Bank, ACM Advisors, Bennington Financial, and Concentra Trust. Known as Canada’s Challenger bank, it serves 578,000 Canadians and nearly 200 Canadian credit unions. It has two main business lines: personal banking (which includes EQ Bank, its digital bank), and commercial banking. EQB is the first all-digital bank in Canada, serving as an alternative banking choice for Canadians, and also being the first to move to a cloud-based platform.
EQB, over a long timeframe, has seen a very strong share price performance, and has a strong track record of execution. Although, in the month of December its earnings missed estimates, and this caused the name to drop. In its recent earnings, net impaired loans increased by $97 million to $623.7 million. EQB says the impairment level should decline in 2025. Not a disaster, but with the miss and some credit concerns, we saw some profit taking in the month of December.
The second worst performer of December was Lightspeed Commerce (LSPD) whose stock price was down 16% on the month, down 15% year-to-date, and down 15% over the past year. It has been trading around the lows of $16 to $30 over the past few years, after a tumultuous decline from $155 in 2021.
Lightspeed (LSPD) is an e-commerce software platform that connects suppliers, merchants and consumers. The platform provides LSPD’s customers with the critical functionality they need to engage with consumers, manager operations, accept payments and scale their business. The platform enables single and multi-location retailers to provide an omnichannel experience for its consumers, and engage with its consumers through online, mobile, social and physical channels.
There was no company specific news relating to the selloff in December, but the stock has been trading around the lows for a couple of years, and investors were likely doing some tax-loss selling into year-end. We think LSPD needs to see a material improvement in profitability and some multiple compression before investors can become more interested in the name.
The worst performer of December was VersaBank (VBNK) whose stock price was down 21% on the month, up 33% year-to-date, and up 33% over the past year. VBNK has been trending nicely over the past several years, although hit did face a significant drawdown in 2022, roughly down 50% in 2022.
VersaBank (VBNK) initially adopted an electronic business-to-business model in 1993, becoming what it believes to be the world’s first financial institution with a branchless model. VBNK is a Canadian Schedule I chartered bank, obtaining deposits and providing most of its loans and leases electronically, with innovative deposit and lending solutions for financial intermediaries that allow them to focus on their core business. It operates two main segments, being its Digital Banking and DRT Cyber operations.
Part of the decline can be attributed to broader market weakness in December, but also partially due to its share issuance (it raised $107 million in December). Its recent earnings were also below analyst estimates, with sales falling 6%, net income down to 20c per share, down from 47c per share in the prior year. Although, earnings were impacted by a one-time cost of $3.3 million associated with the acquisition of Stearns Bank. While recent earnings were a miss, the future looks better, and it is expected to show significant earnings growth in 2025, and it trades at a reasonable valuation of 9.3X forward earnings.
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