These are the TSX stocks that could be winners from Mark Carney’s defence industrial strategy

Prime Minister Mark Carney at CAE Inc. in Montreal, Que., on Feb. 17. Photo by ANDREJ IVANOV/AFP via Getty Images files

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Why Shopify is rebounding, how to dig for value behind ‘headline’ stock plays and more from The Week in Stocks.

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Stock of the week: Shopify Inc.

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Shopfiy Inc. (SHOP:TSX) closed out the week up 10 per cent and among the top five gainers on the S&P/TSX composite index as investors continued to reevaluate their initial reactions to the e-commerce company’s earnings, which came out on Feb. 11. Despite delivering its highest quarterly revenue in 20 years, investors were spooked by an adjusted earnings per share miss and overall trepidation regarding AI, at one point pushing shares of Shopify down as much as 27 per cent intraday. That led a few analysts to jump to the shares’ defence. CIBC Capital Markets analysts Todd Coupland and Dylan Ridout said in a note that Shopify remained among their top picks with a price target of $250, trimmed back from $271. “We see upside from durable profitable growth with optionality from agentic e-commerce,” Coupland and Ridout said, arguing Shopify’s integration with OpenAI, Google’s Gemini and Microsoft’s Co-pilot positioned the company to benefit from those platforms rather than suffer displacement. Jefferies Equity Research analysts Samad Samana and Jeremy Sahler said the “negative stock price has surprised us” in a note following the earnings release. Since the earnings, several other investing houses also reaffirmed their price targets for Shopify, and this week’s market action seemed to bear that out, with the stock closing Friday at $172.89. The average 12-month price target based on 46 analysts tracked by Bloomberg is $215.02.

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Keeping score

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Some possible winners from Canada’s new defence industrial strategy

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The numbers in Canada’s just-announced defence industrial strategy are big: $180 billion in procurement and $290 billion in defence capital investment, spread out over 10 years, with Prime Minister Mark Carney pledging the strategy will prioritize the awarding of contracts to Canadian companies. “Our initial reaction is that the announced initiatives are highly constructive for our coverage, given the strong ‘Buy Canada’ focus, the targeted sectors/capabilities (in our coverage’s wheelhouse), the scale of planned investment and the decision to designate private sector firms as strategic partners,” Desjardins Group Capital Markets analysts Benoit Poirier and Michael Kypreos said in a note. Off the mark, Poirier and Kypreos believe companies that will benefit from the policy include Bombardier Inc. (BBD:TSX), CAE Inc. (CAE:TSX), Calian Group Ltd. (CGY:TSX), MDA Space Ltd. (MDA:TSX) and Kraken Robotics Inc. (PNG:TSX). Desjardins estimates that the plan to dedicate approximately 70 per cent of defence spending to Canadian companies will provide a $5.1 billion annual boost that could translate to roughly 300 defence contracts per year. The new policy targets 10 priority sectors including aerospace, a positive for Bombardier. Poirier and Kypreos expect MDA to benefit from a push in the areas of space-based intelligence, surveillance and reconnaissance, space domain awareness and satellite communications. On Thursday, MDA launched a wholly owned defence company, 49North Ltd. CAE and Calian are placed to benefit from specialized manufacturing, training and simulation, they said, while Kraken could win in the area of autonomous systems. Ottawa also plans to create a drone innovation hub, spending $105 million over three years. Company selections are expected to be announced this summer, Poirier and Kpyreos said.

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How to find value in ‘behind the headline’ stocks

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Sometimes there are gains to be made on the road less travelled. That’s the idea behind a theme-based stock screening system that Mehmet Beceren at Rosenberg Research & Associates Inc. said takes investors past the “headline names” to second- and third-tier companies that “may be less crowded, (have) less already priced in, and (are) better positioned to benefit as a market theme matures.” Beceren highlighted copper as one such investing theme. The price of copper has soared last year and into this year on fears of supply constraints, a lower U.S. dollar and geopolitical risk and miners have risen in tandem. The idea behind the stock screen is to find companies positioned to offer key technologies, materials, or services but that are playing catch-up to the copper theme trade. Based on that, Rosenberg Research created a global copper miner supply chain basket of 24 names. Among the TSX-listed names are Finning International Inc. (FTT:TSX), Fortis Inc. (FTS:TSX), Mattr Corp. (MATR:TSX), Major Drilling Group International (MDI:TSX) and Orbit Garant Drilling Inc. (OGD:TSX). There are also names on the list from Australia, the U.S., Mexico, Japan, Sweden and Germany. “Year-to-date, the upstream miners supply-chain basket has outperformed a generic copper miners portfolio, as second- and third-order effects start to play out — and as investors look for more diversified, better-priced ways to express exposure to a popular theme,” Becerent said.