TD raises price target on Coveo Solutions

TD Cowen analyst David Kwan raised his target on Coveo Solutions (Coveo Solutions Stock Quote, Chart, News, Analysts, Financials TSX:CVO) to $7.50 from $7.00, citing stronger-than-expected bookings, improving profitability and an acquisition that could strengthen the company’s position in AI-powered e-commerce.

As reported by the Globe and Mail, Kwan maintained his “Buy” rating on the Montreal-based software company following its second-quarter fiscal 2027 results. The average analyst target is $6.79.

“We expect a slightly positive reaction to another solid quarter, slight increase to its (conservative) SaaS growth guidance, and the Anglera acquisition, which strengthens its AI competitive positioning in its core Commerce offering,” Kwan said in his Oct. 29 report.

Coveo reported Q2 revenue of US$40.4-million, up 8% year-over-year, while software-as-a-service (SaaS) subscription revenue increased 9% to US$39.1-million. Revenue from its core platform grew 12%, reflecting stronger underlying growth following the discontinuation of its legacy Qubit platform. Adjusted EBITDA increased to US$2-million from US$600,000 a year earlier, while the company’s net loss narrowed to US$3.1-million from US$4.4-million.

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Coveo also reported its strongest quarter for new business bookings, including two contracts each worth more than US$1-million annually.

“Two seven-figure per year transactions helped us achieve the strongest new business bookings quarter in our history,” CEO Laurent Simoneau said.

The large contract wins provide additional recurring revenue opportunities and suggest that enterprise customers are continuing to invest in Coveo’s search and AI software. The company also announced the acquisition of San Francisco-based Anglera, which develops AI technology to enrich and organize product information for e-commerce businesses. The acquisition is intended to help retailers improve product discovery and recommendations by making their catalogue data more useful to AI-powered shopping tools. Simoneau said Anglera adds product data enrichment capabilities to Coveo’s existing commerce platform, allowing the company to expand its offering to retailers.

Coveo’s net expansion rate increased to 102%, or 105% excluding the remaining effects of discontinued Qubit customers. Both measures improved by three percentage points sequentially. The improvement suggests existing customers are increasing their spending relative to the previous quarter, an important indicator of recurring revenue growth.

Coveo ended September with US$82.7-million in cash, although operating activities used US$14.9-million during the quarter, compared with US$10.8-million a year earlier.

Despite the company’s recent progress, Kwan said its valuation does not reflect its growth prospects. “Valuation remains near historical lows and in line with IT Services companies, despite double-digit SaaS organic growth that is set to reaccelerate,” he said.

Kwan’s higher target reflects his expectation that stronger bookings, improving customer spending and the addition of Anglera will support accelerating subscription revenue growth.

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