It happened. Constellation Software (TSX:CSU) has hit an all-time high, currently trading at over $3,600 as of writing. It’s a strong start to work and could be an incredibly strong year for the tech company. In fact, analysts believe that this tech stock has even more to go, up to 20% as possible. So, let’s look at the reasons why and why the stock is possibly one of the best buys you could get on the TSX today — even at these pricey all-time highs.
Already outperforming
The strong start to 2024 comes as the company put about $235 million of capital to use in the fourth quarter alone. Constellation stock made 23 acquisitions, which brought the full year of 2023 to a record $2.27 billion. This is far above the $1.69 billion the company achieved in full year 2022.
But it’s not over yet. Constellation stock has already agreed to put out another $600 million for acquisitions in the first quarter of 2024. This already hits about a third of many analyst estimates for the full year 2024. So, the stock clearly has further to go.
These record-breaking performances come as other tech stocks continue to flounder. While share prices have increased for a few, not many have been able to put capital to use in the way that Constellation stock has. In fact, most tech stocks cannot claim the history that Constellation stock has in general. So, let’s look at where this company could go next.
Broader tech movement
While the last year was strong, Canadian tech stocks should see an overall rise in 2024. This should occur as valuation multiples for Canadian tech companies are well below average. Furthermore, high interest rates have also been way down the sector. So, should interest rates come down, this would be beneficial to tech stocks as well, with more cash on hand to make investments and investors having more cash to invest.
Furthermore, there should be a stabilization in the company’s growth and profitability, which would make it more visible to investors at large. Overall, analysts believe that overall tech stocks are about 43% below where they should be from a valuation standpoint. As most of the tech companies on the TSX are due to be profitable again in 2024, this would also be great news for Constellation stock, which has already achieved this status.
Consolidation strength
But it’s not just the fact that Constellation stock is a tech stock that adds to its value. Companies that focus on mergers, acquisitions, and consolidations are disciplined when it comes to creating capital. These companies tend to be countercyclical, as they hold onto their capital to make valuable acquisitions.
Constellation stock has certainly been a prime example of this. As we saw, the tech stock deployed a record amount of capital in acquisitions in 2023. However, it’s not as if there won’t be any more valuable plays in 2024.
There are likely to be continued opportunities for constellation stock in 2024. Valuation expectations may continue to decline, and tech companies may also continue to consider selling their businesses. Balance sheets also remain risky for many tech companies, which creates a prime opportunity for companies like Constellation stock.
So, could the company achieve another 20% increase? Analysts believe so, now bumping their potential price target higher and higher. So, if you have the cash on hand, now is a great time to get on this prime consolidator.
