Canada’s tech scene has quietly moved higher amid the artificial intelligence (AI)-driven market boom. The Canadian market may not be as well-known for its high-tech innovators.
That said, several firms are worth looking into if you’re looking to put some cash to work in the tech scene but aren’t all too happy about the state of the loonie versus the greenback (the Canadian dollar goes for about US$0.69 today, making the exchange as painful as it’s been in recent memory).
Constellation stock: A great deal in the Canadian software scene
Shares of Constellation Software (TSX:CSU) may be just a bit out of reach of the average new investor with only a limited sum to invest. Even after suffering a 13% correction from its recent peak, just north of $4,800 per share, CSU stock still goes for more than $4,200, making it a tough name for the retail crowd to jump into. Indeed, the advent of partial share buying at various brokerages may allow new investors to get a piece of the fast-moving Canadian software titan as it comes in.
Either way, I think the name is worth picking up at current levels as it continues to grow via smart acquisitions in Canada’s small-cap software universe, one that’s full of gems that the average investor does not have on their radars, not even remotely. Indeed, I like the view of Constellation Software as a high-tech private equity (or even venture capital) type of play minus the high fees and barriers to entry that are usually present for everyday retail investors.
More gains to come in 2025?
Undoubtedly, CSU stock has been hot over the past two years, rising just over 89%, leaving the TSX Index and even the S&P 500 behind. The big question, however, is whether Constellation Software can maintain this momentum. The recent correction in shares, which began in late November, I think, should be viewed as more of a buying opportunity than the beginning of a bear market moment.
Indeed, everything still seems to be looking up for the Canadian software firm. As long as it makes successful mergers and acquisitions (M&A) and continues to explore Canada’s startup tech scene, I believe the company’s incredible growth engine can stay strong, regardless of where Canada’s economy ends up in 2025. Of late, acquisition spending may have come in just a tad more modest, but going into 2025, I’d look for the pace to pick up.
Constellation needs to be wheeling and dealing to keep its double-digit growth rate strong. Indeed, it’s tough to grow revenue at north of 20% per year without a few big deals every so often. Though Constellation still has the financial firepower to make a deal happen, do note that it’s incredibly value-conscious when it comes to M&A. So, don’t expect it to pay any price to land some deal that makes analysts happy and investors excited.
Bottom line
Once the right deal comes along, Constellation will act. Until then, management is fine waiting for the perfect opportunity. And if investors are too impatient to wait, perhaps longer-term investors may have a shot to buy. In 10 years, I see Constellation stock much higher as it continues progressing along with its long-term value-oriented M&A strategy.
