Fourth quarter earnings season is upon us and National Bank Financial analyst Richard Tse has you covered with a range of technology stocks to keep an eye on.
Tse’s calendar Q4 preview, delivered on January 27, lists seven of his Best Ideas in tech, including high flyers like Kinaxis (Kinaxis Stock Quote, Chart, News TSX:KXS) and Shopify (Shopify Stock Quote, Chart, News TSX:SHOP) to special situations names like Real Matters (Real Matters Stock Quote, Chart, News TSX:REAL).
That’s Tse’s take on the Q4 earnings from his broad coverage group, saying that his notable names have all done well over recent quarters.
“The reality is that many of our Outperform names have had considerable returns in 2019 (and so far in 2020),” wrote Tse. “No doubt, with that backdrop, we’d rather be opportunistic but we also recognize that within this market –we need to look at those names on a relative basis and in light of that, a number of our names have been re-rated relative to the recent market moves which explains why we have a number target price changes in this note.”
Of the 14 companies listed in his note, Tse has seven rated “Sector Perform” and seven as “Outperform.”
National Bank Financial’s “Sector Perform” Group
The “Sector Perform” category contains Absolute Software (Absolute Software Stock Quote, Chart, News TSX:ABT), which Tse feels is still very early into its strategic roadmap and thus the analyst is waiting for execution on that strategy.
Altus Group (Altus Group Stock Quote, Chart, News TSX:AIF), Tse said, should deliver a solid Q4 while still being a few years out for scaling growth from its analytics segment.
Constellation Software (Constellation Software Stock Quote, Chart, News TSX:CSU), Tse says, is reasonably valued at current levels.
EXFO (EXFO Stock Quote, Chart, News TSX:EXF), which recently reported numbers in-line with Tse’s estimates and is also reasonably valued, the analyst thinks.
Maxar Technologies (Maxar Technologies Stock Quote, Chart TSX:MAXR), saw its target price raised from US$16 to US$20 but still looks reasonably priced at current levels, according to Tse.
Mediagrif (Mediagrif Stock Quote, Chart, News TSX:MDF), recently got a target cut from $8.00 to $7.50 by Tse on account of being in early innings of a strategic shift with a limited record of growth.
Tse remains cautious on Sierra Wireless (Sierra Wireless Stock Quote, Chart, News TSX:SW), due to macro headwinds.
National Bank Financial’s “Outperform” Group
For the “Outperform” group, Tse features CGI Group (CGI Group Stock Quote, Chart, News TSX:GIB.A) — target price $120.00, projected 7 per cent 12-month return — which the analyst said should deliver an in-line quarter but which continues to benefit from its enterprise base of customers’ digital transformation projects and accretive tuck-ins.
Tse likes Docebo (Docebo Stock Quote, Chart, News TSX:DCBO) which National Bank Financial has a target price of $20.00 on, (a projected 22 per cent return). Tse likes it for its technical edge in AI and social learning capabilities.
Kinaxis (Kinaxis Stock Quote, Chart, News TSX:KXS), recently had its target raised from $115.00 to $120.00 at NBF (projected 11 per cent return) with Tse saying the company will deliver better-than-expected results in this Q4.
Lightspeed POS (Lightspeed POS Stock Quote, Chart, News TSX:LSPD), has earned a National Bank Financial target $52.00, implying a projected 24 per cent return. Tse expects the Montreal-based ecommerce company will deliver in-line quarterly results while expanding in a market that’s ripe for disruption.
OpenText (OpenText Stock Quote, Chart, News TSX:OTEX), which has target price US$50.00 at National, implying a nine per cent return. Tse likes the Waterloo-based software stalwart for its attractive relative value, organic growth optionality and defensive attributes.
Real Matters, which has a target price $17.00, implying projected 30 per cent return at NBF. Tse sees it having a solid quarter off continued strength in mortgage origination in the US.
Shopify earned a target raise to US$500.00 (projected 11 per cent return) on expectations of a solid quarter and runway to scale internationally.
Overall for the year ahead, Tse says he is recommending a “barbell” approach, balancing legacy names with solid balance sheets and strong recurring cash flows with a select number of growth names. (All figures in Cdn dollars unless where noted otherwise.)