This Canadian IT stock is a buy, analyst says

National Bank Financial Capital Markets analyst Richard Tse maintained an “Outperform” rating and C$185.00 target price on CGI (CGI Stock Quote, Chart, News, Analysts, Financials TSX:GIB.A) in a Sept. 18 report, following a lunch Q&A with President and CEO François Boulanger and CFO Steve Perron.

Tse said the recent pullback in CGI shares mirrors broader weakness across the IT services sector, but his investment thesis is unchanged.

“Our prime investment thesis continues to be that an increasing pace of acquisitions will drive value over the next 12 months with an attractive option from a potential inflection in the macro backdrop for IT services,” he said.

Based in Montreal, CGI is Canada’s largest technology company, employing about 90,000 people globally. It provides IT consulting, systems integration and outsourcing solutions across North America, Europe and India.

On artificial intelligence, Tse said CGI is already deploying the technology across its 90,000 employees, from code development to call-centre quality testing.

While the productivity gains are incremental so far, “its deployment presents potential margin expansion over time across a wide range of processes from RFP preparation, testing, to managed services delivery, allowing the company to preserve contract profitability.”

On the client side, AI is being built into CGI’s portfolio through areas like robotic process automation, and the firm’s shift toward outcome- and usage-based pricing aligns with broader industry trends.

Macro conditions remain a challenge, particularly in Europe’s manufacturing vertical, but Tse noted resilience in financial services and stabilization in government spending. Meanwhile, M&A remains the company’s core growth driver, supported by more than $2.1-billion of available liquidity. He said management continues to see attractive valuations across the board, with a focus on U.S. commercial and European operations, and on both technical and industry-specific capabilities. CGI repurchased 5.1 million shares year-to-date through the third quarter, and has bought back another 2.8 million in the current quarter.

“With historical ROICs between 15% and 16%, we think acquisitions are a reasonable growth lever for CGI,” Tse said, adding that organic growth remains part of management’s strategy as well. “Looking ahead, we’d view pullbacks as opportunistic entry points. In our view, we see recent acquisitions as accretive with a continued pace of deals continuing into fiscal 2026.”

Tse forecasts Adjusted EBITDA of $3.21-billion on revenue of $15.99-billion in fiscal 2025, improving to $3.39-billion on $16.74-billion in 2026. With the stock down nearly 20% year-to-date and trading at 9.1 times forward EV/EBITDA, he said the risk-reward remains attractive despite limited near-term catalysts.

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