AI won’t kill Constellation Software, this investor says

Raymond James Investment Counsel portfolio manager Chris Blumas said Constellation Software (Constellation Software Stock Quote, Chart, News, Analysts, Financials TSX:CSU) represents an attractive long-term buying opportunity, despite a sharp pullback in the shares over the past year and near-term uncertainty tied to management changes and artificial intelligence concerns.

Appearing on BNN Bloomberg Market Call on Dec. 17, Blumas said recent negative sentiment around Constellation has created an entry point for investors willing to look beyond short-term headlines.

“Oh, absolutely. I think this is one, you know, a phenomenal compounder,” Blumas said. “Sentiment has kind of gone against Constellation over the short term, but I think over the long term that will rerate, and that’s where you’ll get that opportunity for earnings growth and multiple expansion.”

Investor focus has recently centered on leadership changes at the company. On Sept. 25, Constellation announced that founder Mark Leonard had resigned as president for health reasons. Mark Miller, previously the company’s chief operating officer, was appointed president by the board, while Leonard remains a director. Miller’s other roles within Constellation were left unchanged.

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Blumas downplayed the strategic impact of the transition, noting the company’s decentralized operating model.

“This is a very, very decentralized business,” he said. “I think the timing was kind of more unfortunate. I mean, when people have health issues, they have health issues.”

Blumas said a broader concern among investors has been whether advances in artificial intelligence, particularly so-called ‘vibe coding’ tools, could pressure software companies’ economics. He argued Constellation is more likely to benefit from those developments than be disrupted by them.

“The real kind of uncertainty or what people were worried about is more on the AI side,” Blumas said. “But the reality is these are the companies that are going to be using that capability to make their products better. And so I’m quite constructive on Constellation at this price and think it would be a great buy.”

The stock has declined 27.47% over the past 12 months but remains up roughly 107% over the past five years, reflecting its long-term acquisition-driven growth strategy.

Analyst sentiment has softened modestly alongside the share price decline. As of mid-December, 10 analysts rate the stock “Buy” and three rate it “Hold,” with no “Sell” ratings, and a consensus target price of $4,812.77. By comparison, as of Oct. 15, nine analysts rated the stock “Buy,” three “Hold,” and none “Sell,” with a higher consensus target of $5,360.42.

Blumas said that disconnect between long-term fundamentals and near-term sentiment is precisely what makes the stock compelling at current levels, reinforcing his view that Constellation remains one of the market’s highest-quality compounders.

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