Large acquisitions could bolster the fatigued prospects of Constellation Software (TSX:CSU), says Euro Pacific Canada analyst Andrej Krneta
Tomorrow, after market close, Constellation will report its Q1, 2015 results. Krneta expects sales will be essentially flat, but in a research update to clients this morning he raised his one year price target on the stock from $420 to $490, while maintaining his “Hold” rating. The analyst explained the reasoning behind his decision, which places his projected return on Constellation at just 1%.
“Currency travails, competitive deal environment, and a thin news-flow in the quarter are set to confirm a slow start to the year,” he said. “Soft organic growth is a concern. But it may take the back seat to rising expectations of large acquisitions. The recent announcement of a C$200M capital raise is encouraging. Thus, we have increased our price target to C$490 to reflect the potential growth recovery”
Krneta thinks Constellation will post revenue of $439.9-million in the first quarter, a little under the street consensus of $446-million.
The analyst believes Constellation’s March follow on raise is a clear signal that it intends to target large transactions.