What is your opinion of this company's prospects over the next 1 to 3 years? Reflecting on your most recent comments last month, how has your opinion changed ?
Does the management of this company and its track record to date support it being "shareholder friendly"?
Is this the classic "falling knife" story?
Do you consider it under valued or fairly valued?
What other Canadian companies in this sector would you consider to be under valued or fairly valued today?
Please feel free to add any additional comments worthy of consideration.
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CVO noted that a single shareholder of 23.7 million shares had tendered their shares to its buyback program. Only Elliott Investment Management has this many shares, though there was no announcement by Elliott. At 42%, Elliott's block could pressure the share price and certainly a sale would not be a great endorsement for a relatively small company.
We think the stock is interesting for its direct exposure to AI, and being a Canadian name, but we also do not view it as a screaming buy. Long-term, growth is good, but growth has been slowing. Cash flow has flipped positive, and margins are improving, but it is fairly expensive.
Regarding management, its stock-based compensation is somewhat high, but not yet overly concerning.
Its price has been declining since February of this year, and a drop below $6 would be concerning from a technical standpoint. We would prefer to wait until its price has settled into a range, but if the AI trade continues and it continues to beat on earnings, we could see the name recovering eventually.