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On Tuesday, BMO Capital Markets updated its outlook on Constellation Software (ETR:SOWGn) (CSU:CN) (OTC:CNSWF), increasing the price target to Cdn$5,700 from Cdn$5,500, while maintaining an Outperform rating on the stock. The adjustment comes in the wake of the company’s first-quarter results for the year 2025.
The first-quarter performance of Constellation Software showed lighter revenue, which may have been affected by foreign exchange fluctuations, a weaker showing at Altera, or the typical negative seasonality of the first quarter. However, the company’s EBITDA met analysts’ expectations. Despite this quarter marking the company’s softest M&A activity since the third quarter of 2020, M&A activity has reportedly accelerated after the quarter ended.
BMO Capital’s analyst noted that minor revisions were made to the fiscal year 2025 and 2026 EBITDA estimates for Constellation Software, taking into account improved margins and foreign exchange considerations, which helped to balance the lower M&A figures. The new price target reflects a 28x multiple on the calendar year 2026 expected enterprise value to EBITDA, excluding spinoffs.
The analyst’s model predicts a year-over-year EBITDA growth for Constellation Software, excluding spinoffs, of 16% for fiscal year 2025 and 15% for fiscal year 2026. Additionally, there has been a slight increase in the FY2026E total operating income (TOI) EBITDA forecast for Constellation Software, while the estimate for LMN EBITDA has been modestly reduced due to the lower M&A expectations.
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