CSU stock is a Top Pick for 2024 at National Bank

A new year and a new price target for Constellation Software (Constellation Software Stock Quote, Chart, News, Analysts, Financials TSX:CSU).

On January 16, analysts from National Bank issued a comprehensive report on their expectations for 2024 and analyst Richard Tse says he likes CSU as his large-cap technology pick.

The analyst says he likes CSU’s accelerated pace of capital deployment.

“We estimate Constellation’s pace of capital deployment exiting 2023 was 5% ahead of consensus expectations,” Tse wrote. “That outsized rate should fuel upside to growth. In our view, a concerted effort to fuel the pace of capital deployment is seeing execution. And with >40k potential targets in its pipeline, a comfortable leverage ratio of 1.0x and approximately $1.2 bln in available liquidity, we think that pace of deployment should continue. We also think there’s upside to that number (i.e., 20% Y/Y growth) given the Company’s willingness to target larger deal sizes in recent past (e.g., Optimal Blue, Allscripts’ Healthcare Assets, and WideOrbit).”

Tse has raised his price target on CSU from $3400 to $4300. The stock closed January 16 at $3,609.01.

“We continue to like CSU for its defensive attributes (recurring revenue and cash flow) and heightened growth profile given the accelerated pace of capital deployment,” the analyst concluded. “We reiterate our Outperform rating albeit with a revised target price of C$4,300 (was C$3,400) to reflect revised inputs to our multi-staged DCF. That target implies 25.1x EV/EBITDA on our F2024 estimates (was 19.9x).”