Buy Altus Group stock on pullbacks, says National Bank

National Bank Financial analyst Richard Tse reiterated an “Outperform” rating on Toronto-based real estate software and analytics company Altus Group (Altus Group Stock Quote, Charts, News, Analysts, Financials TSX:AIF) in a company note on Wednesday, saying investors will want to buy the stock on short-term weakness in shares.

Tse said National Bank recently attended the annual user group conference held by Altus Group, called Altus Connect, and said above-average attendance underscored a growing interest in the company and was likely fuelled by potential plans for a US listing.

Altus has asset and fund intelligence for commercial real estate clients and has business across North America. The company spoke at Altus Connect about its product roadmap, which Tse called ambitious. It includes a set of applications to harness a broad set of data to give clients insight on property assets. Tse said the plan is to sell a group of predefined services through its Altus Market Insights business and he related that Altus sees the platform as potentially driving 50 to 150 bps of incremental performance for its clients.

“The bottom line, the potential upside for incremental growth from a scaling set of products and services could be meaningful, but it’s too early to ascribe that potential upside to our target. Even so, we see continued execution under the current product set expanding the Company’s customer base and growth trajectory, which is why we rate this name as Outperform,” Tse wrote.

Altus’ share price did well over the past five years, rising from $30 in 2018 to as high as $70 by late 2021. The stock has pulled back since and has been in the $50-$60 range for the past half-year. 

With the update, Tse maintained a one-year target price on AIF of $75.00, which at press time represented a projected return of 43 per cent.

“In the short term, we see some risk to the stock heading into reporting season given the Tax headwinds combined with a slowdown in transaction volumes across the office segment. We’d view any weakness in the stock care of those headwinds as an opportunity to build positions given the continued execution in the Company main valuation driving segment, Altus Analytics,” Tse said.