Shares of Quebec-based convenience store icon Alimentation Couche-Tard (TSX:ATD) have been shockingly sluggish for 2024, with just over 3% in gains as the TSX Index proceeded to blast off around 19%.
The past year of underperformance may act as a bit of a red flag for some, as the convenience retailer looks to reach some sort of finish line with its ongoing pursuit of 7-Eleven’s parent company. Undoubtedly, only time will tell if 2025 is the year when the epic deal is in the books. Either way, I think the recent sideways activity in shares of ATD makes the name a worthy buy for value-conscious growth investors going into the new year.
Unsurprisingly, ATD stock lost most of its lustre when the potential 7-Eleven deal was announced. And while there are still hurdles to leap over before such a deal gets finalized, it’s not hard to imagine that many investors are more willing to sit on the sidelines until more details are ironed out.
ATD stock pulls the brakes for 2024—it’s likely time to buy
Though Couche-Tard seems very keen on making the deal happen, recent headlines suggest 7-Eleven is more than willing to pursue all and every option that doesn’t involve being gobbled up by Canada’s convenience store juggernaut. Either way, 2025 is sure to be an interesting year for Couche-Tard as we move a bit closer to some form of closure.
After consolidating for around a year, I view Couche-Tard as a hidden gem of a growth play hiding in plain sight. While recent quarters haven’t been spectacular, I find the company still has ample cash to make a big deal happen, whether it involves 7-Eleven or another juggernaut in the space. Personally, I think the company’s cash and credit hoard opens up many potential growth pathways, many of which are currently severely underrated by investors.
One major wildcard move that Couche-Tard could do if a 7-Eleven deal falls through in the new year is to consider picking up a big-league grocer, perhaps in the Canadian or U.S. market. Undoubtedly, such a deal would mirror the failed Carrefour deal many years ago. While investors were no fans of Couche-Tard getting into the grocery business, which entails thin margins, I think that such a move would help level up the company’s fresh food push.
Couche-Tard: Ready to make deals
Indeed, Couche-Tard’s managers are fully aware of the future of electric vehicles, which is just around the horizon. Still, there are other options to get drivers to spend money in its stores. Most notably, fresh food and convenient restaurant-quality food are ways that Couche-Tard can continue to grow as fewer gas-powered cars drive around.
In prior pieces, I’ve noted that the electrification of vehicles was more of an opportunity than a headwind for Couche-Tard. Given its successes in navigating the Norwegian market, where EVs are picking up traction, I’d argue Couche-Tard is among the best-positioned of the gas station-equipped convenience store firms to make the transition.
We can’t know for sure what Couche-Tard’s next move will be (7-Eleven deal, grocery acquisition, smaller-scale deals, or something else entirely). However, I think investors can put their trust in management as they only make deals that drive value and deliver growth over the long term. At a mere 19.2 times forward price-to-earnings, I view ATD stock as a growth steal as 2024 comes to a close.
