In a research note titled Slower for longer is better reflected now, Desjardins Securities analyst Jerome Dubreuil said results from global IT service provider peers suggest further challenges for Canadian companies in accelerating revenue growth, pointing to ongoing budget constraints and longer sales cycles.
“This contrasts with prior expectations of imminent improvement, with additional expected delays before interest rate cuts suggesting that more patience is required before we see a material acceleration in revenue growth — clients seem to continue prioritizing initiatives that provide immediate returns, with discretionary projects taking a hit,” he said. “We continue to like the sector’s attractive attributes and we find current valuations reasonable in the context of growing pent-up demand for IT services.”
The analyst’s top pick heading into earnings season is Converge Technology Solutions Corp. with a “buy” rating and $7 target (unchanged), exceeding the $6.73 average.
“We believe the company will report another decent quarter, thus further improving its track record of execution and earnings visibility,” said Mr. Dubreuil.