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Coveo Solutions is the real deal in AI, says National Bank

Coveo Solutions (Coveo Solutions Stock Quote, Chart, News, Analysts, Financials CSX:CVO) has traded down since its debut in November but National Bank analyst Richard Tse is a dedicated fan of the Artificial Intelligence company. In an update to clients on Monday, Tse reiterated his “Outperform” rating on Coveo and target price of C$18/share for a projected return of 85.2 per cent.

Founded in Quebec in 2004, Coveo Solutions is a software-as-a-service (SaaS) provider specializing in artificial intelligence solutions. The company’s cloud-native, multi-tenant Intelligence layer incorporates search, recommendations and personalization solutions into digital experiences to provide connected relevance for various-use cases across commerce, service, website and workplace applications.

Tse’s updated analysis comes after National Bank held investor meetings with Coveo management which reinforced his belief that the company is the real deal.

“While we’d characterize the majority of meetings as ‘getting to know you’ introductory they nevertheless reinforced our investment thesis as covered in our [January 31] in-depth initiation of coverage report,” Tse said. “Perhaps most incremental was that despite the pullback in the stock, it’s a name that continues to garner strong interest from investors.”


As primary takeaways from the meetings, which were attended by Coveo Chairman and CEO Louis Têtu, CFO Jean Lavigueur and Chief Corporate Development Officer Nicholas Goode, Tse noted that the company’s Commerce segment is one of its primary growth drivers despite having only been established around 2019, making it an indicator for some of the company’s other verticals.

Tse pointed to names like Amazon and Wayfair as examples of companies taking full advantage of integrating AI into the eCommerce segment, which Tse believes brings with it a total addressable market greater than $20 billion. Coveo recently accentuated its AI offerings through the acquisition of Quibit, which Tse notes to be a leader in AI-powered merchandising.

Tse noted that Coveo has fostered a number of high-profile partnerships and native integrations with companies like Adobe, Workday and Salesforce, which ranks Coveo sixth among its top 25 global technology partners.

Finally, Tse considered the notion of spotlighting data privacy, particularly with changing regulations pertaining to how personal data is collected and stored, which presents an opportunity for Coveo’s relevance platform, which primarily focuses on first-party data.

Tse projects modest growth for Coveo over the next few years, calling for revenue to go from $64.9 million in 2021 to $84.8 million in 2022, implying year-over-year growth of 30.7 per cent. Tse then projects Coveo moving into nine figures in 2023 at $109.7 million for a projected year-over-year increase of 29.4 per cent. (All report figures in US dollars except where noted otherwise.)

Meanwhile, following a reported loss of $11 million in 2021, Tse projects the company’s adjusted EBITDA to project further losses of $23.1 million in 2022 and $30.4 million in 2023.

“We continue to believe Coveo is democratizing applied Artificial Intelligence (AI) for the enterprise masses, enabling a secular step function up in technology,” Tse said. “In our view, Coveo’s proven platform combined with a powerful ecosystem (which includes native integrations with some of the most pervasive and prolific enterprise applications) has allowed the company to become a leader in its respective early market.”

Coveo’s stock price has been clipped by 40 per cent since it began trading on the Canadian Securities Exchange in November. However, the stock has rebounded by 6.5 per cent since hitting a low of $9.12/share on February 24.

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About The Author /

Geordie Carragher is a staff writer for Cantech Letter
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