The TSE Index was up 2.55% in the month of May, up 6.25% YTD and 13.78% over the past year. Canadian GDP was up 0.2% in the first quarter of 2024 and 0.50% for the full year; in the USA, GDP was up 1.6% for the first quarter and 2.90% for the full year. Canadian inflation rate was 2.70% annually in May 2024 and the US annual rate was 3.30% in May 2024. With this background, the following Table presents the highest and lowest performers for the month of May 2024.

Brookfield Renewable Partners (BEP.UN)

The top performer of May was Brookfield Renewable Partners whose stock price rose 32% on the month, 9% year-to-date, but was still down 7% from the year prior. One year ago, at the end of May 2023, BEP.UN stock’s price had unknowingly been peak trading at $38.89, just shy of 52-week high levels of $39.90 which were achieved in June 2023. Things have been up and down since, with the stock hitting a 52-weeek low of $27.43 in October 2023 but the recent recovery bodes well.

BEP.UN is one of the largest pure play renewables companies in the world. BEP.UN has a 23-year history as a publicly traded operator and investor in renewable power and sustainable solution assets, currently employing approximately 4,770 workers. BEP.UN’s portfolio of assets spans hydroelectric, wind, utility-scale solar, and other sustainable solutions assets, including distributed generation solar and storage. BEP.UN’s portfolio of sustainable solutions assets includes investments in Westinghouse (a leading global nuclear services business), investments in an operating portfolio of carbon capture storage (CCS), renewable natural gas, and over one million tons of recycled materials annually.

The big pop in share price was driven by news that BEP.UN had entered into a contract with Microsoft as their renewable partner. BEP.UN will deliver an incremental ~5,200 GW hours per year of generation under the finalized partnership with Microsoft to deliver over 10,500 MW of renewable capacity between 2026 and 2030. First quarter earnings also came in in May which were decent and pointed to potential fundamental changes with positive tailwinds from electrification and data center demand trends. The company also increased its distribution by 5%.

Primo Water Corporation (PRMW) 

The second-best performer of May was Primo Water Corporation (PRMW) whose stock price was up 18% on the month, up 54% year-to-date, and up 76% over the past year.

PRMW is a leading North American-focused water solutions provider with a highly predictable, recurring revenue business model due to stable demand. PRMW’s business model is usually referred to as “razor-razorblade” since the initial sale of a product would create frequent purchases of complementary consumable products and services. The company serves residential and commercial customers with various water services including water dispensers, purified bottled water, water refills, sparkling and flavoured water, etc. PRMW is the largest scale player in an industry with attractive economics of stable demand and a highly recession-proof business model

The large jump that the stock saw in May was earnings driven. EPS was 19c which was 37% ahead of estimates and more than doubled from the year prior. Revenue of $452 million beat estimates of $439.1 million and displayed growth of nearly 10% from the year prior. EBITDA was $93.9 million and beat estimates by 7%. 2024's revenue and EBITDA forecasts were also raised while strong growth is expected over the next two years. The balance sheet remains a bit leveraged, which would essentially be our only knock on the company today. It continues to look good, and we would endorse it.

Real Matters Inc. (REAL)

The third-best performer of May was Real Matters Inc. (REAL) whose stock price was up 11% on the month, down 9% year-to-date, and down 3% over the past year. The solid month does not take away from the volatility that REAL’s shares have seen over the last year with a 52-week range of $4.43-$7.10.

REAL operates in the real estate appraisal and title service industry in North America, the company plays an essential role in the value chain of the real estate market by helping mortgage lenders reduce the risk of lending and meet regulatory requirements. In addition, REAL also provides insurance inspection services by ensuring all the historical and current owners of the property are taken into account during the due diligence process, maintaining transparency between buyers and sellers. REAL generates revenue by providing local knowledge and expert opinions on the fair market value of a residential property.

First quarter earnings were solid, recording EPS of 2c beating estimates of a loss of 2c. Revenue was $11.5 million, missing estimates of $14.67 million but increased 12% year-over-year. US appraisal revenue rose 19% and US Title revenue rose 13% both from prior year levels. Volumes improved modestly as 30-year rates declined a bit. It gained customer and market share in the quarter. EBITDA was $0.7 million, vs a loss of $1.29 million expected. REAL discussed its control on costs and its leverage to rates. Cash remains high at $45M. EPS has come way down from prior highs but is expected to show solid growth into 2025. The jump in share price is positive for a stock that had very been hit hard over the last few years, but overall it was an OK quarter to us.

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TELUS International (Cda) Inc. (TIXT)

The worst performer of the month was TELUS International (Cda) Inc. (TIXT) whose stock price was down 33% on the month, down 32% year-to-date, and down 63% over the past year. The falloff for TIXT has been large, touching 52-week lows in the month with a price range of $7.55 - $20.76.

TIXT designs, builds, and delivers digital solutions for customer experience internationally and is the spun-off subsidiary of well-known Canadian conglomerate, Telus.

The big decline was earnings driven. For the first quarter, revenue fell 4.2% year over year, to $657 million, but this was well short of estimates of $675.5 million. EPS was 22c, vs 18c estimated and net income doubled. EBITDA was $153 million beating estimates of $140.5 million. Full-year EPS guidance was 93c to 98c, vs 95c estimated. The market reaction seems harsh, but TIXT has missed before and is likely developing a credibility issue with investors. It did beat on several metrics, but investors are not happy with the miss nor the decline in sales, in what is supposed to be a recovery play.

Docebo Inc. (DCBO)

The second worst performer of May was Docebo Inc. (DCBO) whose stock price was down 24% on the month, down 27% year-to-date, and up 1% over the past year. DCBO has seen some volatility over the last year with a  52-week range of $47 to $76.27. The stock shot up at the end of February on strong earnings on AI driven demand.    

Docebo (DCBO) was founded in 2005 and provides an easy-to-use, configurable and affordable learning platform that enables organizations to train internal and external workforces. It aims to modernize the way that enterprises learn by applying new technologies to the traditional corporate Learning Management Software (LMS) market. DCBO has emerged as a high-growth, AI-leveraged, learning management software platform that seeks to compete with the legacy systems of the space.

The big drop in share price was guidance driven. Recent earnings displayed EPS of 23c beating estimates of 17c. Revenue of $51.4 million matched estimates and grew 24% year-over-year. Subscription revenue was $47.9 million and annual recurring revenue is now over $200 million. EBITDA of $7.46 million beat estimates by 11%. Guidance called for 17% to 18.5% sales growth this year, slightly below consensus estimates. Customer count also rose 9.3%. Results look fine on the base level, but the market punished the light guidance. Additionally, while concerns over a high churn in its small and mid-sized business segments are putting pressure on share price, its tailwinds and pipeline for growth through the government sector are encouraging. It is still trading at a premium valuation and this type of pullback can happen for growth stocks that are priced for perfection.

Shopify Inc. (SHOP)

The third worst performer of May was Shopify Inc. (SHOP) whose stock price was down 17% on the month, down 22% year-to-date, and up 4% over the past year. SHOP share price took a huge hit on first quarter earnings and is now trading near 52-week lows. The share 52-week share price range is $88.26 - $90.31.

Shopify (SHOP) is a leading global commerce company that provides essential internet infrastructure for commerce, offering tools to start, scale, market, and run a business. SHOP has transformed since inception in 2004, initially as a platform to help small businesses set up online stores. SHOP now provides all types of merchants with an all-in-one solution spanning a multi-channel front end, a single integrated back end, and infrastructure for data-informed decisions.

We have previously commented on SHOP’s first quarter as well as our outlook here. Concerns surrounding SHOP’s revenue growth and weak operating margins for the second quarter were the main drivers bringing the stock down.

Take Care,

Disclosure: The analyst(s) responsible for this report do not have a financial or other interest in the securities mentioned.