Telus Reports Steep Loss Amid Mixed Quarterly Earnings from Shopify, BCE

Canadian Giants Navigate Divergent Paths in Q4 Earnings

Telus Corp. ($T) reported a significant net loss of $155 million, or $0.11 per share, for the fourth quarter of 2023, a stark contrast to the $215 million profit ($0.15 per share) recorded in the same period a year prior. This unexpected downturn was largely attributed to a $400 million non-cash goodwill impairment charge related to its Telus International ($TIXT) segment, alongside increased depreciation and amortization expenses. The Vancouver-based telecommunications giant saw its shares tumble as investors reacted to the profitability setback.

The earnings landscape was far from uniform, with e-commerce platform Shopify Inc. ($SHOP) delivering robust results that exceeded analyst expectations, and telecom rival BCE Inc. ($BCE) reporting stable, albeit modest, growth. Shopify’s adjusted earnings per share reached $0.34, surpassing the consensus estimate of $0.28, driven by strong merchant solutions revenue and increased Gross Merchandise Volume (GMV). Meanwhile, BCE posted adjusted earnings per share of $0.85, in line with estimates, supported by steady subscriber growth in its wireless and internet divisions.

Market Impact

Telus shares ($T) closed down 7.8% at $22.50 on the Toronto Stock Exchange, wiping approximately $1.8 billion from its market capitalization in a single trading session. This marked the steepest one-day percentage decline for the stock since March 2020, as trading volume surged to 18.5 million shares, nearly double its 30-day average. The impairment charge and associated profitability concerns overshadowed a 3% year-over-year increase in operating revenue to $5.2 billion, which was largely driven by subscriber additions in its core telecom business.

Conversely, Shopify ($SHOP) surged 12.5% to $92.75, adding over $17 billion to its market valuation, following its strong earnings report. The Ottawa-based company’s Q4 revenue climbed 23% to $2.1 billion, exceeding the $2.05 billion analyst consensus, while its Gross Merchandise Volume (GMV) increased 19% to $75 billion. This positive momentum for Shopify spilled over into other growth-oriented tech stocks listed on the TSX, with the broader S&P/TSX Capped Information Technology Index gaining 3.2% on the day.

BCE Inc. ($BCE) experienced a more muted but positive reaction, with its stock rising 2.1% to $48.30. The Montreal-based telecom provider reported Q4 revenue of $6.4 billion, up 1.5% from the previous year, and announced 120,000 net new wireless subscribers and 55,000 net new internet customers. While its results were solid, they lacked the explosive growth seen at Shopify or the significant negative surprise from Telus, reflecting the mature and stable nature of the Canadian telecom sector. The divergent performance underscores a sector-specific reallocation of capital, with investors favoring less debt-leveraged, higher-growth tech names over capital-intensive telecom players in a persistently high-interest rate environment.

What Analysts Are Saying

"Telus's Q4 results present a mixed picture: solid operational growth in telecom, but a significant profitability hit from the Telus International impairment," noted John Chen, a telecommunications analyst at RBC Capital Markets. "While the core telecom segment remains resilient with healthy subscriber additions, the non-cash charge raises questions about the long-term strategic value and integration of its IT services division, especially given the $400 million write-down. We maintain our 'Sector Perform' rating but have lowered our 12-month price target to $24.00 from $26.50."

Conversely, analysts were broadly bullish on Shopify's trajectory. "Shopify continues to demonstrate robust execution and market share gains in the global e-commerce landscape," stated Sarah Lim, a software equity analyst at Scotiabank. "Their Q4 performance, particularly the strong GMV growth and better-than-expected profitability, validates their strategic focus on merchant solutions and enterprise offerings. We see significant upside, reiterating our 'Outperform' rating with a price target of $105.00, reflecting continued expansion in their merchant base and ecosystem."

For BCE, the sentiment was more neutral. "BCE delivered a predictable, stable quarter, consistent with its defensive characteristics," commented Michael Wong, a senior analyst at TD Securities. "Subscriber growth across wireless and internet remains healthy, and the dividend yield of 7.2% continues to attract income-focused investors. However, the modest revenue growth of 1.5% highlights the competitive pressures and significant capital expenditure requirements in the Canadian telecom market. We maintain our 'Hold' rating with a price target of $49.00, acknowledging its defensive appeal but limited growth catalysts."

What to Watch

Investors should closely monitor Telus's ($T) Q1 2024 guidance and any further updates regarding its Telus International ($TIXT) segment, particularly how management plans to improve profitability and integrate the unit. A key support level for Telus shares is identified at $22.00; a sustained break below this could signal further downside pressure.

For Shopify ($SHOP), the focus will be on the sustainability of its Gross Merchandise Volume (GMV) growth and its ability to expand its merchant solutions offerings in a potentially softening consumer spending environment. Resistance is noted around the $95.00 level, which corresponds to its early 2023 peak. Any signs of a slowdown in e-commerce trends or increased competition could impact its valuation.

BCE ($BCE) investors should watch for developments in Canadian telecom regulation and the ongoing competitive dynamics, especially regarding 5G network expansion and pricing strategies. The company’s ability to manage its substantial debt load in a volatile interest rate environment will also be critical. Key events include the next Bank of Canada interest rate decision scheduled for March 6, which could influence borrowing costs for all capital-intensive telecom providers.