CVO stock is still undervalued, National Bank says

Following the company’s most recent quarterly results, National Bank Financials analyst Richard Tse remains positive about the prospects for Coveo Solutions (Coveo Solutions Stock Quote, Chart, News, Analysts, Financials TSX:CVO).

On February 5, CVO reported its Q3, 2024 results. The company lost $6.2-million on revenue of $31.8-million, a topline that was up 11 per cent over the same period last year.

“We had a strong third quarter and saw a broad resurgence in new bookings with new and existing customers,” said Louis Tetu, Chairman and CEO of Coveo. “We believe we are beginning to see the strong early interest in generative AI turning into tangible opportunities with customers, especially in situations with a compelling ROI. Our leading AI platform is strategically positioned to empower customers to leverage AI, helping them to drive higher revenue and profitability and improve overall efficiency across their operations. We believe the GA release of Relevance Generative AnsweringTM in December will allow us to continue to build on this momentum.”

Tse says that a lot of people are talking AI, but Coveo is actually doing it.

“Consistent with our recent quarterly preview, Coveo reported solid in-line results with profitability (Adj. Operating Income) exceeding expectations quite meaningfully,” he wrote. “We believe growing operating leverage comes from cost measures earlier in the year. Equally important, Coveo saw an acceleration in bookings this quarter that had it reaching its highest bookings quarter since F22. We attribute that to the Company’s growing profile in AI and evidenced by a number of broad wins (already) in its Coveo GenAI product called Relevance Generative Answering.”

In a research update to clients February 6, Tse maintained his “Outperform” rating and one-year price target of $14.00 on CVO,, implying a return of 40.3 per cent at the time of publication.

Tse thinks Coveo will post Adjusted EBITDA of $3.6-million on revenue of $126.1-million in fiscal 2024. He expect those numbers will improve to EBITDA of $6.4-million on a topline of $146.7-million the following year.

“Bottom line, we believe Coveo remains one of the few direct plays on AI in our coverage universe and the results point to an accelerating growth trajectory for bookings (H1/F25) and then revenue (H2/F25),” the analyst concluded.