TD raises price target on Lumine Group to $45.00

Lumine Group’s (Lumine Group Stock Quote, Chart, News, Analysts, Financials TSXV:LMN) third-quarter revenue increased 55% as acquisitions contributed to accelerating growth, prompting TD Cowen analyst David Kwan to raise his target on the Toronto-based software company to $45.00 from $42.00 in his Nov. 5 report.

Kwan maintained his “Buy” rating, arguing that stronger organic growth and continued acquisition activity should support a recovery in the share price. “We expect the solid Q3 results to help drive a continued rebound in the stock, as M&A activity remains elevated and is helping drive a sharp reacceleration in revenue growth (55 per cent year-over-year in Q3),” Kwan said.

Lumine reported third-quarter revenue of US$289.9-million, up from US$186.7-million a year earlier, including 3% organic growth. Operating income increased 31% to US$85.5-million, while net income rose 3% to US$25.5-million. Cash flow from operations increased 44% to US$66.9-million, while free cash flow available to shareholders rose 27% to US$53.9-million.

Lumine, which acquires and operates software businesses serving the communications and media industries, completed two acquisitions during the quarter for total estimated consideration of US$231.5-million. The acquisitions of Quortex and Imagine Communications expand Lumine’s presence in video technology and media infrastructure, although their lower initial margins are expected to weigh on consolidated profitability until operational improvements take effect.

CEO David Nyland said Lumine has deployed more than US$500-million on acquisitions so far this year.

“Our decentralized operating model allows our core businesses to keep delivering results while we onboard new acquisitions, strengthen them using our domain-optimized playbook, and advance our M&A pipeline,” Nyland said.

Kwan thinks improving organic growth suggests demand for Lumine’s software remains resilient despite concerns about artificial intelligence disrupting established software businesses. “Meanwhile, a strengthening in organic growth suggests that LMN is facing little/no AI disruption, which management reaffirmed,” he said.

Although Kwan expects margins to remain under pressure in the fourth quarter as Lumine integrates recent acquisitions, he anticipates a recovery in 2027 as those businesses become more profitable. “Margins may be soft in Q4, but we expect a strong rebound in 2027,” he said.

Kwan’s higher target reflects his confidence that continued acquisitions, improving organic growth and stronger margins will support Lumine’s earnings growth.

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