RBC Capital Markets maintained its outperform rating and US$126.00 price target on the shares of The Descartes Systems Group (DSG.TO, DSGX) on Thursday, after the company reported its fiscal 2027 first-quarter financial results on Wednesday.
Descartes delivered another beat and raise, said RBC and added that organic growth "continued to strengthen, despite a mixed global trade environment."
Strengthening organic growth validates Descartes's innovation and value proposition, said RBC. Organic growth strengthened to ~9% from 8% last quarter, despite reduced global freight shipments in the quarter, added RBC.
"Increased organic growth stems from adoption of Descartes's trade content, e-commerce solutions, routing & scheduling amid higher fuel costs, and freight visibility (i.e., MacroPoint)," said RBC.
Descartes's customers are "increasingly utilizing more software" to help manage their operations, in light of increasing supply chain complexity and disruptions, RBC stated.
Descartes is investing in the development of a new agentic AI layer on top of its core network, noted RBC.
RBC believes AI agents leading to automated workflow will "increase the value and stickiness" of Descartes's network, while also creating new consumption-based revenue streams.
"AI agents increase visibility to the moat around Descartes's core business in an AI era," said RBC.
RBC sees "compelling risk-reward, given healthy organic growth, continued margin expansion, and the likelihood of additional M&A," it said.
"With Descartes trading at the low end of its historical valuation range, we see attractive risk-reward on the stock," added RBC.
Price: $110.10, Change: $+7.22, Percent Change: +7.02%