In the uncertain terrain of rising interest rates and compressed valuations, two Canadian technology companies — Constellation Software and Shopify — have continued to grow where others have faltered. One acquires quietly and methodically, building an empire of indispensable niche tools; the other reinvents itself after a pandemic-era peak, reaching toward enterprise and creator economies alike. For those willing to hold through turbulence, these stocks represent a wager not merely on companies, but on the enduring human appetite for commerce and efficiency.
Motley Fool Eyes Constellation Software, Shopify as High-Risk Growth Plays
An essentially unlimited runway for growth through continued consolidation
Mark
Why does Constellation Software deserve attention when so many tech stocks are struggling right now?
Mimi
It's because the company operates in a market that's fundamentally fragmented. They buy software companies that serve specific industries—things that are hard to replace once they're embedded in a business. The earnings jumped significantly year-over-year, and they're still acquiring. That suggests they're finding good targets at reasonable prices.
Luke
But we should be clear: most of that growth is coming from acquisitions, not organic expansion. That's a different animal. If they can't find good companies to buy, or if prices get too high, that engine slows down.
Mark
And Shopify? The pandemic boom seems to have worn off.
Mimi
It has, but the company is still growing revenue at 26 percent. That's not nothing. And they're not just sitting still—they're building new products like POS Go and Shopify Collabs, and they're partnering with the big consulting firms to reach enterprise customers.
Luke
The partnerships are interesting, but we don't have numbers on how much they'll actually move the needle. And the slowdown in growth is real, even if it's partly due to tough comparables. The question is whether they can reignite that growth or if they've hit a more natural ceiling.
Mark
So both are bets on future acceleration?
Mimi
Essentially, yes. They're both positioned to benefit if the economy stabilizes or if interest rates come down and investors get interested in growth again.
Luke
Which is a big if. Right now, both companies are priced on hope. The fundamentals are solid, but the valuations are still compressed by higher rates. That's the real risk here.
Le Pouls
- Rising interest rates have created a punishing environment for growth stocks, squeezing valuations and testing investor resolve across the technology sector.
- Constellation Software quietly defied the pressure, posting a Q4 2022 profit of US$152M — up from US$124M — while continuing to absorb niche software companies in a fragmented and seemingly inexhaustible market.
- Shopify faces the harder optics of a post-pandemic hangover, yet still delivered 26% revenue growth in Q4 2022, refusing to let the comparison against its own extraordinary past define its trajectory.
- New tools like POS Go and Shopify Collabs, alongside partnerships with consulting giants such as IBM, Deloitte, and Accenture, signal a deliberate push beyond small merchants toward enterprise-scale ambition.
- Both companies remain high-risk propositions, but analysts argue that patient investors with longer horizons may find themselves well-positioned if rate pressures ease and market appetite for growth returns.
In the uncertain terrain of rising interest rates and compressed valuations, two Canadian technology companies — Constellation Software and Shopify — have continued to grow where others have faltered. One acquires quietly and methodically, building an empire of indispensable niche tools; the other reinvents itself after a pandemic-era peak, reaching toward enterprise and creator economies alike. For those willing to hold through turbulence, these stocks represent a wager not merely on companies, but on the enduring human appetite for commerce and efficiency.
Two Canadian technology stocks — Constellation Software and Shopify, both listed on the Toronto exchange — have managed to post meaningful growth even as rising interest rates have weighed heavily on the broader sector.
Constellation Software operates in a space that can seem unremarkable at first glance: it acquires, builds, and manages software systems tailored to specific industries — tools so embedded in daily operations that clients rarely leave. Working across North America and Europe in both public and private sectors, the company reported Q4 2022 net profit of US$152 million, up from US$124 million a year prior, with diluted earnings per share rising from US$5.86 to US$7.19. Its Lumine Group subsidiary also completed the acquisition of WideOrbit Inc., a U.S. vertical market software firm that will run as an autonomous unit. Because the market for industry-specific software remains deeply fragmented, Constellation's acquisition-led growth strategy appears to have a long runway ahead.
Shopify's story is one of deceleration and resilience. After exploding during the pandemic as merchants rushed online, growth has naturally cooled against those exceptional prior-year comparisons. Yet the company still grew revenue 26% in Q4 2022, with both subscription and merchant solutions revenue climbing. It has also been expanding its toolkit — POS Go brings mobile point-of-sale capability to physical retail, while Shopify Collabs connects merchants with content creators. Partnerships with IBM Consulting, Deloitte, Accenture, KPMG, and Ernst & Young open doors to enterprise clients that were once out of reach.
Neither company is without risk in the current environment. But both have demonstrated the capacity to grow through adversity, and for investors willing to accept volatility in exchange for long-term potential, each offers a compelling — if demanding — case for patience.
Two Canadian technology stocks stand out as worthy bets for investors willing to stomach volatility: Constellation Software and Shopify. Both trade on the Toronto exchange and both have managed to post solid results even as rising interest rates have hammered growth-oriented companies across the sector.
Constellation Software operates in a business that feels almost boring until you understand its power. The company buys, develops, and manages software systems designed for specific industries—the kind of mission-critical tools that businesses cannot easily abandon. It works across Canada, the United States, the United Kingdom, and other European markets, both in public and private sectors. In the fourth quarter of 2022, it reported net profit of US$152 million, a meaningful jump from US$124 million in the same quarter the year before. Diluted earnings per share climbed to US$7.19 from US$5.86. The company, through its Lumine Group subsidiary, also completed the acquisition of WideOrbit Inc., a vertical market software company in the U.S. that will operate as its own autonomous unit. This acquisition strategy matters because the software market for industry-specific tools remains highly fragmented—meaning Constellation has what appears to be an essentially unlimited runway for growth through continued consolidation.
Shopify, the e-commerce platform provider, tells a different story of deceleration followed by resilience. The company exploded during the pandemic as brick-and-mortar retail ground to a halt and merchants rushed online. That surge has cooled. Growth slowed in recent quarters, a natural consequence of comparing current results against an exceptionally strong prior year. Yet even with that headwind, Shopify grew revenue by 26 percent in the fourth quarter of 2022. Subscription revenue and merchant solutions revenue both climbed—up 11 percent and 26 percent respectively. The company has also been building new tools to expand its addressable market. POS Go, introduced in 2022, is a mobile point-of-sale device that handles card swipes, barcode scans, and other retail functions. Shopify Collabs, another new offering, creates a network where merchants can connect with content creators who can promote their products to new audiences. Beyond product innovation, Shopify has signed partnerships with major consulting firms including IBM Consulting, Deloitte, Accenture, KPMG, and Ernst & Young. These relationships should help the platform gain traction among the enterprise client bases of these global firms.
Both companies carry real risk. Growth stocks have been under pressure as central banks have raised interest rates, compressing valuations across the sector. But both Constellation and Shopify have demonstrated the ability to grow earnings and expand their markets even in a tougher environment. For investors with the stomach for volatility and a longer time horizon, either could reward patience if economic conditions shift or if the market's appetite for growth stocks returns.
Citations marquantes
Given the fragmented nature of this market, there's an essentially unlimited growth runway for the company— Investment analyst on Constellation Software's acquisition strategy
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