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CIBC Lowers Price Target on Software and Services Stocks

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CIBC Capital Markets lowered its price target on eight software and services stocks ahead of Q1 results for the sector.

"We expect high single-digit growth in revenue and EBITDA within our coverage in Q1, despite AI-disruption concerns that have reduced the market cap of our Software coverage by an average of 24% year to date," analyst Stephanie Price said in a note to clients.

"With limited AI-related read-throughs from near-term earnings, investors have been reducing multiples and rethinking terminal values," Price said.

"For Q1, we are roughly in line with consensus expectations," the analyst said. "We expect a volatile earnings season and a focus on AI narrative for companies that meet or beat consensus expectations."

"We expect that earnings misses could result in outsized market reactions," Price said. "That said, with an average 8% consensus EBITDA growth expectation for the quarter, we also see the possibility of upside from multi-year valuation lows."

Price made the following changes:

CGI Inc. (GIB-A.TO) to $112 from $132 (Neutral)

Computer Modelling Group Ltd. (CMG.TO) to $5 from $5.50 (Neutral)

Constellation Software Inc. (CSU.TO) to $4080 from $4610 (Outperformer)

Descartes Systems Group Inc. (DSG.TO, DSGX) to US$116 from US$126 (Outperformer)

Docebo Inc. (DCBO.TO, DCBO) to US$28 from US$34 (Outperformer)

Kinaxis Inc. (KXS.TO) to $171 from $203 (Outperformer)

Open Text Corp. (OTEX.TO, OTEX) to US$27 from US$32 (Neutral)

Thomson Reuters Corp. (TRI.TO, TRI) to US$124 from US$140 (Outperformer)

(covers equity, commodity and economic research from major banks and research firms in North America, Asia and Europe. Research providers may contact us here: https://www..com/contact-us)

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