Why Cogeco (TSX:CGO) Stock Is the Perfect Investment for Your TFSA

Cogeco stock may gain up to 40% in the next year making it an ideal investment for your TFSA

| More on:

As the second wave of the pandemic keeps people indoors, Canadians need to ensure that all their investments either make them money or save them money. The Tax-Free Savings Account is a perfect tool that can help investors save money on taxes. You can contribute up to a cumulative $69,500 for tax saving purposes when you invest in Canadian financial instruments using the TFSA option.

Cogeco Inc (TSX:CGO) is one such top company for your TFSA. It operates in the communication and media space across Canada and the United States. Cogeco Communications (TSX:CCA), its subsidiary provides residential and business customers with internet, video, and telephony services in Quebec and Ontario, Canada. It does the same in the U.S. across 11 states under the Atlantic Broadband brand. Under its Cogeco Media subsidiary, it owns 23 radio stations that serve audiences mainly across Quebec, as well as Cogeco News, a news agency.

A strong Q4 for Cogeco

The company recently announced its results for the fourth quarter of fiscal 2020, ended August 31, 2020. Revenue increased to $624.2 million, up 2.2% from the same period in 2019. Adjusted EBITDA increased to $299.9 million, up 6.7%. Profit for the period was up to $96.7 million compared to $97.1 million in fiscal 2019.

In October, Cogeco announced the acquisition of DERYtelecom, Quebec’s third-largest cable provider for $405 million. The acquisition will be completed by the end of the second quarter of fiscal 2021, giving a boost to Cogeco’s in areas adjacent to Quebec.

Rejection of takeover bid

Cogeco and its subsidiary Cogeco Communications were the targets of a hostile takeover bid from Rogers Communications and Altice USA. There were two bids made for the companies in the last three months. The proposals were rejected by Gestion Audem, the Audet family holding company that holds 69% of all voting rights of Cogeco Inc., which in turn controls 82.9% of all voting rights of Cogeco Communications Inc.

Gestion Audem made its position very clear when it put out a statement. “As we did on September 2nd, 2020, following the announcement of their first unsolicited proposal, members of the Audet family unanimously reject this further proposal. Since this is apparently not registering with Rogers and Altice, we repeat today that this is not a negotiating strategy, but a definitive refusal. We are not interested in selling our shares,” said Louis Audet, President of Gestion Audem.

Cogeco also claimed the performance of its stock price and operating results were easily outpacing that of Rogers or Altice. In a show of strength, Cogeco Connexion announced network expansion projects in Ontario and Quebec. The company expects low-single-digit percentage growth in revenue for fiscal 2021 and adjusted EBITDA to remain constant for the same period.

The Foolish takeaway

Cogeco stock is currently trading at $79.68, and analysts have given it a 12-month target of $110.5. The company holds a strong position in Canada and is likely to give investors solid returns over the next 12 months. The stock is a great option for TFSA accounts, as it has an upside of almost 40% from current levels which can be withdrawn tax-free.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool recommends ROGERS COMMUNICATIONS INC. CL B NV. Fool contributor Aditya Raghunath has no position in any of the stocks mentioned.

More on Tech Stocks

The virtual button with the letters AI in a circle hovering above a keyboard, about to be clicked by a cursor.
Tech Stocks

Is OpenText Stock a Buy, Sell, or Hold for 2025?

OpenText stock has fallen in the last few years, but that could mean this top tech stock remains an undervalued…

Read more »

AI microchip
Tech Stocks

Celestica Stock: Buy, Sell, or Hold?

Celestica's stock price has rallied 950% in the last five years. Will the AI boom send it even higher in…

Read more »

data analyze research
Tech Stocks

2 Ridiculously Cheap Growth Stocks to Buy Hand Over Fist in 2024

Well Health Technologies is a cheap growth stock to buy for its record-breaking results, massive revenue growth, and profitability.

Read more »

A worker uses a double monitor computer screen in an office.
Tech Stocks

4 Reasons to Buy Kinaxis Stock Like There’s No Tomorrow

Kinaxis stock has a strong past. But there is even more to look forward to from this top tech stock.

Read more »

The letters AI glowing on a circuit board processor.
Tech Stocks

The Future of AI: Best Canadian Stocks to Buy Now

Here are two of the best AI-focused stocks in Canada that you can consider adding to your portfolio before it’s…

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Tech Stocks

2 TFSA Stocks to Buy Right Now With $7,000

Are you looking for growth stocks that can help you maximize the tax-free withdrawals of the TFSA? This article is…

Read more »

cloud computing
Tech Stocks

3 No-Brainer Tech Stocks to Buy Right Now for Less Than $1,000

Not all tech stocks are the risky investments that many think they are. Which is why we're focusing on the…

Read more »

An analyst uses a computer and dashboard for data business analysis and Data Management System with KPI and metrics connected to the database for technology finance, operations, sales, marketing, and artificial intelligence.
Tech Stocks

Where Will Open Text Stock Be in 5 Years?

OpenText stock is one of the few tech stocks that's been around for decades. But does it have what it…

Read more »