Market Recap and Outlook: Week of Feb 19, 2023

Kyle Prevost, editor of Million Dollar Journey and founder of the Canadian Financial Summit, summarizes recent financial headlines and provides context for Canadian investors.

Steady pipeline profits rarely make headlines

Pipeline operators tend to attract attention only when something goes wrong. Yet, Canada’s largest pipeline companies reported another steady quarter of earnings — the kind of predictable performance that rarely makes front-page news unless a crisis occurs.

All three stocks ticked up modestly on the news, even Enbridge, which slightly missed earnings expectations. With steady demand for fossil fuels outside conflict zones, pipeline capacity in North America remains valuable, and these companies continue to offer attractive dividend yields, often around the mid-6% range.

Both Enbridge and TC Energy noted that higher capital costs in the natural gas sector are a headwind and may persist. That predictability in cash flow and dividend payouts is why many income-focused investors prefer pipelines to the more volatile upstream energy producers such as Suncor (SU/TSX) and Cenovus (CVE/TSX). For Canadian investors seeking broader exposure, the Horizons Pipelines & Energy Services Index ETF (HOG) provides diversified coverage of the sector. For further reading on pipeline stocks, see the Million Dollar Journey resource linked below.

Shopify posts profit, but outlook clouds stock price

Shopify (SHOP/TSX) beat fourth-quarter expectations but the market focused on the company’s cautious outlook, sending the stock lower in after-hours trading by roughly 15% on the announcement day.

Earnings per share came in at $0.07, versus a consensus estimate of a small loss. Revenue was $1.73 billion, above the $1.65 billion forecast. While posting a profit is encouraging for shareholders, some investors fixated on management’s comments about normalized e-commerce growth and the risk of weaker consumer spending amid elevated inflation.

“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.”

Shopify highlighted strategic focuses like the Shopify Fulfilment Network and partnerships such as Deliverr, while reporting solid year-on-year revenue growth. The company’s market capitalization is significantly larger than other Canadian tech names, which means it heavily influences technology-focused ETFs like the iShares S&P/TSX Capped Information Technology Index ETF (XIT). For a deeper look at Canadian tech stocks, further resources are available through Million Dollar Journey.

Travel demand suggests consumers aren’t acting recessionary

While headlines debate recession risk, travel and rideshare companies are showing robust activity. Recent results from Uber and Airbnb suggest demand remains strong, and Lyft’s weaker guidance highlights company-specific challenges rather than broad consumer pullback.

Lyft’s stock fell sharply after issuing muted revenue guidance, reflecting slower rider recovery versus pre-pandemic levels. By contrast, Uber reported a strong quarter and gained in after-hours trading, while also indicating prudent hiring plans and improved productivity: headcount is down from peak levels even as revenue is substantially higher compared with 2019.

Airbnb also delivered solid results. Hosts continue to see demand, and the platform’s average daily price has held steady near prior-year levels. Listing growth further supports the view that consumer appetite for travel remains intact.

Global growth forecasts for 2023

Visual Capitalist’s mapping of GDP forecasts showed the world is expected to grow roughly 2.9% in 2023, with Canada forecast at about 1.5%. That pace isn’t spectacular, but pockets of strength exist and several emerging markets are poised for faster growth.

Key observations from the 2023 global growth outlook include:

• The United Kingdom continues to face economic challenges relative to some European peers.

• Russia’s economy is weakened compared with past years, but sanctions have not led to immediate collapse.

• India’s pro-business stance and energy policy choices support resilient growth prospects.

• Oil-driven economies like Guyana are growing rapidly, though reliance on fossil revenue brings policy and sustainability risks.

• Many emerging markets look set for stronger expansion in 2023, presenting potential opportunities for investors focused on global growth.

• Political instability and anti-business measures can still undermine otherwise favorable commodity dynamics, as seen in Chile’s more modest outlook despite high copper prices.

Early economic indicators this year have been firmer than some expected, raising the possibility that several countries may outperform conservative forecasts. For investors, that means maintaining a balanced view: some sectors and regions will face headwinds, while others could surprise to the upside.

Kyle Prevost is a financial educator, author and speaker. When he’s not on a basketball court or in a boxing ring, he helps Canadians with their finances at MillionDollarJourney.com and through the Canadian Financial Summit.