The broad TSX Index has been roaring higher this summer, with the tech bull market leading the upward charge on both sides of the border. Indeed, with the artificial intelligence (AI) revolution working its way into earnings results and conference calls of a plethora of firms around the globe, the big question is whether it’s time to stay aboard the heated tech trade, double down on the AI high-flyers (the hottest of the hot), or if it’s time to take just a few chips off the table before the next correction rears its ugly head.
Though I’m never against keeping one’s powder dry in case there’s a steep, sudden drop in valuations across the board, I think that it’s a mistake to think that there’s zero value to be had just because the stock market (the TSX and S&P 500) is flirting with fresh, new all-time highs. Some stellar tech darlings have gotten left behind so far this year. And in this piece, we’ll check out one that I think is a relative bargain hiding in plain sight on the TSX Index.
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CGI stock has sat out the great bull run of 2025, at least so far
Enter shares of CGI (TSX:GIB.A), which is down just shy of 16% year to date despite posting some reasonably decent quarters. Undoubtedly, organic growth and margins have not been as high as they could be. Still, I think it’s a bad idea to give up on the firm, given how much upside could be in the cards if the firm were to make up for lost time. Indeed, I think shareholders in the tech-savvy IT consulting play ought to be patient as the stock rides out a rough patch of waters.
Of course, it’s not easy to be in a name that’s in a rut while most everything else is taking off to new heights. It’s frustrating and would cause just about any new investor to hit that sell button. While CGI may have encountered a few price target cuts after a less-than-stellar (but still not horrendous) third quarter for its fiscal year 2025, I’d be inclined to take on a more contrarian stance.
Why?
Macro headwinds that could take away from corporate IT spending budgets won’t last forever, especially as the next act of the AI revolution plays out. Additionally, look for CGI to keep wheeling and dealing (mergers and acquisitions, or M&A) as it unlocks synergies while doing its best to jolt organic growth. Indeed, AI has a big role to play as CGI looks to roll ahead. And as the firm looks to discover synergies via M&A, I’d not dare stand in the way of the firm as it adds more talent to its already talented workforce.
CGI stock looks too cheap
At the time of this writing, shares of GIB.A trade at 17.58 times trailing price to earnings (P/E) or just over 15 times forward P/E. Neither depressed multiple does CGI justice, especially given its wide economic moat, management’s knack for building via M&A, and the potential for IT spend to really kick things up a notch as the AI boom looks to act as a serious driver of economic growth.
In short, CGI isn’t just a good stock to buy while it’s down; it’s a magnificent one.
