Canadian ETF Upgraded to Buy Despite Technical Recession
EWC: Canada In Technical Recession, But Here's Why You Want To Buy (Rating Upgrade)
Image: Seeking Alpha
Canadian stocks experienced a rise despite the country entering a technical recession, marked by two consecutive quarters of negative GDP growth. The iShares MSCI Canada ETF (EWC) has been upgraded to a buy due to its strong valuation and momentum, with a potential upside target of $65.
- 01Canada is in a technical recession with two consecutive quarters of negative GDP growth.
- 02The iShares MSCI Canada ETF (EWC) trades at a P/E of 16.4x, with a long-term earnings growth rate of 15.5%.
- 03EWC's PEG ratio is just above 1, indicating attractive valuation.
- 04The ETF has significant exposure to Financials, Materials, and Energy sectors, which supports its performance against the S&P 500.
- 05Technical analysis indicates a bullish ascending triangle pattern, with strong price support in the $50s.
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Despite Canada entering a technical recession characterized by two consecutive quarters of negative real GDP growth, Canadian stocks saw gains at the end of May. The iShares MSCI Canada ETF (EWC) has been upgraded to a buy rating, benefiting from strong momentum and a favorable valuation. EWC is currently trading at a price-to-earnings (P/E) ratio of 16.4x, with a long-term earnings growth rate of 15.5%, resulting in a PEG ratio slightly above 1. The ETF's performance is bolstered by its substantial investments in the Financials, Materials, and Energy sectors, along with favorable interest policies and momentum in metals. Technical analysis suggests a bullish ascending triangle pattern with a target price of $65, supported by robust seasonal trends through July and solid price support in the $50s. Analysts express optimism about EWC's potential, despite the broader economic challenges.
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Investors may find opportunities in Canadian stocks despite economic downturns, potentially influencing market sentiment and investment strategies.
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