Shares of Alimentation Couche-Tard (TSX: ATD) have been a colossal disappointment over the past year, trailing the TSX Index by quite a wide margin. The convenience retailer’s stock is just one bad day (around 1.5%) away from entering bear market territory. And with a rather ominous technical picture, the name will be frightening to buy on the way down. Undoubtedly, when you take away the 7-Eleven pursuit, it’s been quite the uneventful past year.
Quarterly earnings results, while not terrible, haven’t been all too much to write home about, especially as the company underwent a chief executive officer transition. Indeed, new top boss Alex Miller is eager to prove himself as Couche-Tard eyes its largest acquisition to date. Of course, there has been quite a bit of resistance from 7-Eleven, and while a deal is still very much possible, I’d argue that the Canadian convenience retailer is likely to proceed with caution. It’s not one to overpay to get a deal done, even if it’s for the “holy grail” of the industry.
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Is there anything to Couche-Tard beyond its bid to win 7-Eleven?
Bidding wars are never great to get into. And while Couche-Tard will try its best to land a deal at a reasonable price (the current bid, I believe, is more than fair), I think it’s about time investors set their focus across other aspects of the business. At the end of the day, the Circle K owner is incredibly well-managed, certainly more so than 7-Eleven.
Though the stock is in a correction, so too are many of its industry rivals. Given how valuations across the board have changed over the past year, I’d argue that Couche-Tard has more options to put its cash and credit to work. Indeed, if a 7-Eleven deal fell through, I’d argue that not all is lost, as there are still a ton of merger and acquisition opportunities out there. Indeed, the industry has been facing a bit of a slump lately.
Opportunities beyond 7-Eleven exist
One of the most notable targets in my book is Parkland Fuel (TSX: PKI), a $6.5 billion gas station retailer that’s been under quite a bit of pressure in 2024. The stock is in a bear market at the time of writing, down around 23% from its all-time highs. Either way, shares did get a jolt in early February, thanks in part to a big win in court.
If Parkland falls short of estimates as it moves into its next quarterly reveal, I think PKI stock could prove a very attractive bargain for investors and big firms (like Couche) alike. Of course, there’s recession risk should tariffs put a halt to robust economic growth. Either way, as the price of admission into the hard-hit convenience retailer falls further through the year, perhaps Couche-Tard’s odds of getting a better deal will improve.
The bottom line
Though there’s limited wiggle room to scoop up 7-Eleven and Parkland, I think that it’s the potential sea of opportunities that makes ATD stock a great long-term hold. We don’t know when Couche-Tard will ink its next deal, but I trust Alex Miller and the team to lead the ship higher. Bear market or not, ATD stock is a great buy at $70 per share or less. With a 1.1% dividend yield and 15.2 times forward price-to-earnings multiple, the name stands out as highly misunderstood and discounted.
