Descartes Earnings: Strong Quarter Supported by Two Acquisitions Reinforces Long-Term Expectations

We are raising our fair value estimate to USD 90/CAD 127 per share from USD 85/CAD 115 for wide-moat Descartes after the firm reported mixed fiscal 2025 third-quarter results relative to our forecasts, with higher revenue but slightly weaker profitability. Descartes continues to rake in the benefits of increased exogenous shocks and growing complexity in the supply chain. It recorded solid organic growth, bolstered by the acquisitions of MyCarrierPortal, a risk-management firm for freight brokers, for USD 22.5 million and Sellercloud, an inventory- and order-management service for e-commerce vendors, for USD 110 million. We expect these acquisitions to contribute to top-line growth and margin expansion in the coming years. We raised our fair value estimate to account for continued strength on the top line and our optimistic outlook on recent acquisitions, but we view the stock as overvalued, up 22% over the last three months. We see a similar dynamic for much of our coverage, with software stocks running since early September in the hope of further rate cuts and a more pro-growth stance from the incoming administration.