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A general view of the Sun Life Financial building is seen in Toronto May 6, 2015.FRED THORNHILL/Reuters

Inside the Market's roundup of some of today's key analyst actions

Shopify Inc. (SHOP-T, SHOP-N) stock is likely "a bit" cheaper than it may appear, according to Mackie Research analyst Nikhil Thadani, who suggests investors should buy "opportunistically and over time to bet on a strong execution track record."

"The most common pushback on the stock is valuation, which at 10-times forward sales, is at the high end of peers' range and susceptible to execution (spotless so far) and market (impossible to predict) risk," said Mr. Thadani.

"SHOP is up more than 240 per cent since our initiation in November 2016 - revenue has exceeded street expectations every single quarter since the company's 2015 IPO. Our 2018 revenue estimate, which is near the top end of the company's guidance range, is, likely to be exceeded given the company's track record. Our newly introduced 2019 revenue estimates imply 35 per cent year over year (vs. greater-than 70-per-cent year-over-year revenue growth in 2017) revenue growth versus peers' 21 per cent, with execution upside on the positive revenue growth delta, which should support a premium valuation."

On Thursday before market open, Shopify, an Ottawa-based tech company, released a fourth-quarter financial report that exceeded Mr. Thadani's expectations, however he believes the seasonally strong results were already priced in to the stock. Its shares rose just 0.24 per cent on the day.

"The stock is up 36 per cent year-to-date, outperforming the NASDAQ composite's 5-per-cent appreciation over the same period," he said. "Recall, after Q3 results last November, we suggested SHOP could benefit as investors begin to extrapolate 2019 expectations between the holidays & 2018 guidance in February."

"While SHOP has a very established pattern of beating revenue expectations, what set Q4 apart was the very strong bottom line performance relative to expectations – adjusted EPS was 15 cents versus our 3-cent estimate and consensus of 5 cents. The only blemish was a

softer than expected Gross Margin stemming from the company's cloud initiatives."

Looking forward, Mr. Thadani said he expects a first-quarter revenue beat, raising his projection to $206-million, which is 2 per cent above the company's top-end guidance. He also believes full-year fiscal 2018 revenue, which he estimates to be $985-millon, has upside .

"We believe the company's recent win with the LCBO/OCRC for cannabis sales could perhaps provide a few points of annualized organic revenue growth, which is not captured in our estimates," he said. "Overall, we are relatively confident 2018 revenue could exceed the billion dollar milestone."

Keeping a "buy" rating for Shopify, Mr. Thadani raised his target to $170 from $120. The analyst average target is $173.33, according to Bloomberg data.

"As we have previously pointed out on multiple occasions, we view SHOP as one of the highest quality organic growth Canadian tech stories in our decade of following the Canadian technology sector," he said. "SHOP's acknowledged TAM of $10-billion is likely larger than expected, which suggests plenty of room for organic revenue growth."

Elsewhere, Industrial Alliance Securities analyst Blair Abernethy called the results a "strong finish" to 2017. He raised his target by $30 to $145 with a "buy" rating.

Mr. Abernethy said: "In our view, Shopify can continue to rapidly increase its store count, add new products, and gain traction on Shopify Plus with larger retailers. We expect Shopify to sustain a rapid organic growth rate for the next few years, thus justifying a premium multiple."

RBC Dominion Securities analyst Ross MacMillan raised his target for the NYSE-listed stock to US$120 from US$103 with a "sector perform" rating (unchanged).

"4Q17 beat on revenue and profitability driven by strong merchant additions," said Mr. MacMillan. "Revenue and cost estimates go up. The big question is whether investments are all for future initiatives or whether the size of the merchant base coupled with attrition means this level of spend is necessary to sustain growth."

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BMO Nesbitt Burns analyst Tom Mackinnon upgraded Sun Life Financial Inc. (SLF-T) to "outperform" from "market perform" based on improved earnings visibility and its "strong" capital position.

He raised his target to $61 from $56. The average target is $57.62.

Mr. Mackinnon also raised his rating for CI Financial Corp. (CIX-T) to "outperform" from "market perform," citing its "attractive" valuation and "strong" buyback support.

"In our view, CI shares are attractively valued with good prospects going forward," he said.

He increased his target by a loonie to $32. The average is $30.36.

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Fortis Inc. (FTS-T, FTS-N) is "well positioned" to execute on its growth plan, said CIBC World Markets analyst Robert Catellier

He upgraded the St. John's-based utility company to "sector outperform" from "neutral" based on an improved valuation stemming from a recent pullback in share price.

The move came despite the fact that its fourth-quarter 2017 results, released Thursday, narrowly fell below his expectations. Fortis reported adjusted earnings per share for the quarter of 58 cents, which was 6 cents lower than Mr. Catellier's estimate and 5 cents below the consensus. He said the miss was attributable largely to contributions south of the border from Michigan-based ITC Holdings Corp. and Arizona-based UNS Energy Corp.

"While we'd prefer more disclosure on cash flow sensitivity to U.S. Tax Reform, impacts appear modest and manageable," he said. "Despite using conservative assumptions in terms of the rate benefits to customers, in our view FFO/debt metrics should only temporarily dip below 11 per cent in 2018 before recovering on a sustained basis. Elimination of bonus depreciation reduces the grind on rate base, modestly improving the earnings outlook. We believe the company can execute its business plan and maintain its credit metrics without needing to take any dilutive corporate actions. We note with interest that the board has authorized a $500 million At-TheMarket (ATM) equity offering program. If approved, it does not obligate the company to issue under the program, but can address incremental needs on a timely basis. The company positions this more as an aid in executing its growth program.

"The 3-per-cent EPS impact from U.S. Tax Reform reflects a lower tax shield on debt. With a payout ratio of roughly 65 per cent, we are not surprised to see the company reiterate its 6-per-cent dividend CAGR outlook through 2022."

Mr. Cattelier maintained a target of $50, which is narrowly above the $49.36 consensus.

Elsewhere, National Bank Financial analyst Patrick Kenny also upgraded Fortis to "sector perform" from "underperform" with a $43 target.

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Constellation Software Inc.'s (CSU-T) "strong" fourth-quarter results and cash flow continue to support M&A activity, said Echelon Wealth Partners analyst Ralph Garcea.

He raised his rating for the Toronto-based tech company to "buy" from "hold."

On Thursday, Constellation reported quarterly revenue of US$688-million, exceeded the projections of both Mr. Garcea (US$658-million) and the Street (US$665-million). Adjusted earnings per share of US$6.63 also beat estimates (US$6.36 and US$6.25, respectively).

"Subsequent to quarter-end, CSU completed a number of acquisitions for an aggregate cash consideration of $278-million," the analyst said. "The Company has stopped reporting the number of acquisitions made, now only providing an aggregate dollar value. The Company policy is now to only press release acquisitions that have an aggregate purchase price of $50-million or greater. Revenue growth in Q417 was up 22 per cent year over year; 8-per-cent organic growth (or 5 per cent on a FX normalized basis). Recurring revenue accounted for 65 per cent of total revenue."

"In Q417, CSU pulled the trigger on a number of acquisitions for a total cash consideration of $84-million. Subsequent to the end of Q417, CSU entered into agreements to acquire a number of companies for total cash of $278-million. The Company has been adding more international M&A personnel rather than in North America – management noted that North America has 'been combed over … and it was just a natural progression that we'll find more international acquisitions.'"

In justifying his upgrade, Mr. Garcea pointed to several focus points, which included: its diversified market and products; "attractive" VMS (vertical market software) market dynamics; a diversified global and loyal customer base; "great" capital allocators; a "vested interest in doing the right deals" and "highly" predictable revenue.

He raised his target for the stock to $1,000 (Canadian) from $800. The average is currently $841.11.

Meanwhile, Raymond James analyst Steven Li hiked his target to $820 from $710 with a "market perform" rating.

"Constellation has a stellar track record of sustained high ROIC [return on invested capital] (we estimate last 20 Q average ROIC of 34 per cent) although it is de-emphasizing this metric going forward (less disclosure, change in management incentive system) and instead now focuses on FCF growth," said Mr. Li. "Finding companies, like CSU, that can consistently and profitably reinvest capital over decades is rare. That said, with the increased opacity and valuation, we prefer to wait for an entry point."

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Canadian Tire Corporation Ltd. (CTC.A-T) has "good" momentum with customers to go alongside increasing management "intensity to drive even better results," said Desjardins Securities analyst Keith Howlett.

He deemed the retailer's fourth-quarter 2017 results, released Thursday before market open, as "very strong." Diluted earnings per share of $4.10 exceeded the projections of both Mr. Howlett ($3.87) and the Street ($3.79), representing an increase of 18.5 per cent year over year.

"Canadian Tire is performing well across its businesses, from the core and critical Canadian Tire division to the ancillary retail petroleum business,"said Mr. Howlett. "Same-store sales growth in 4Q was 3.5 per cent at Canadian Tire stores, 5.8 per cent at FGL Sports and 3.4 per cent at Mark's. Financial services grew accounts receivables by 8.1 per cent. Gross margin dollars of the petroleum business increased 19.5 per cent to $51.3-million.

"Adjusted EBITDA increased by 10.2 per cent in 4Q and by 8.4 per cent in 2017. Management appears focused on accelerating operational improvements at FGL Sports and Mark's in 2018, as well as introducing the new integrated ('one company, one customer') loyalty program, which will apply to all retail banners and businesses. Canadian Tire will accelerate acquisitions of niche under-marketed brands that it can quickly revitalize and invigorate, and market through Canadian Tire stores."

Mr. Howlett raised his fiscal 2018 EPS projection to $12.28 from $11.55 and introduced a 2019 estimate of $13.68.

Maintaining a "buy" rating for its shares, his target jumped to $200 from $184. The average is $184.33.

"The exit of Sears Canada from the marketplace is a modest positive," he added. "The transition to digital retailing should experience a step change with the new loyalty program to be introduced later this year."

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CIBC World Markets analyst Paul Holden said he has increased confidence in Industrial Alliance Insurance & Financial Services Inc.'s (IAG-T) ability to deliver accelerated core earnings per share growth in 2018, believing its heading into the fiscal year from a "position of strength."

Citing earnings trends, acquisitions, reserve improvement and management guidance, he upgraded IAG shares to "outperform" from "neutral."

"We look at the Q4 reserve strengthening as a positive, not a negative," said Mr. Holden. "It did not cost shareholders much in terms of [book value] and relative to peers, IAG produced good BVPS growth for the year (8 per cent). Policyholder experience will most likely be much improved from 2017, particularly in the first two quarters, providing an earnings tailwind.

"Expected profit was up nearly 16 per cent in Q4, supporting our argument that underlying earnings trends are very good. Individual Insurance should have a better year in 2018 without any drag from lapse. The group business is posting strong growth and with the addition of the U.S. vehicle warranty business could post double-digit earnings growth in 2018. iA Home and Auto is also trending better and should provide an incremental lift to 2018 earnings."

Mr. Holden increased his target by $2 to $66, which is 57 cents less than the average.

"AG is trading at 10.6 times price-to-earnings (2018 consensus), below its five-year average of 11 times and the Canadian peer average of 10.8 times," he said. "We see the potential for multiple expansion from management execution and higher long bond yields."

Elsewhere, BMO Nesbitt Burns analyst Tom MacKinnon downgraded IAG to "market perform" from "outperform" based what he perceives to be "outsized" reserve builds. His target is $63, falling from $66.

"Our lowered target multiple reflects both our belief that we cannot entirely rule out the risk of further lapse deterioration and the sizeable EPS hits they could potentially bring, and the now less available room in mortality/morbidity/interest reserves as offsets, as well as its sector low 201-per-cent MCCSR," said Mr. MacKinnon. "At 10.8 times NTM [next 12 month] EPS, versus 11 times average, valuation upside is limited."

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5N Plus Inc. (VNP-T) is "materially different and attractively valued," said Desjardins Securities analyst Frederic Tremblay.

He initiated coverage of the Montreal-based producer of specialty metal and chemical products with a "buy" rating.

"A new era is unfolding as the new CEO has brought enhanced selectivity on the revenue front, an improved approach to raw materials procurement and greater emphasis on value-add products," said Mr. Tremblay. "As a result, profitability is increasing while earnings volatility is decreasing. VNP's low valuation does not adequately reflect the progress the company has made to date or its operations' positive outlook, in our view."

Mr. Tremblay said CEO Arjang Roshan, who took over the role in February of 2016, has led a "multifaceted" transition of 5N to a material technologies focus from primarily metals and specialty chemicals. He said early progress is "encouraging."

"Increased emphasis on leveraging existing know-how and its global footprint enable 5N Plus to source and process materials at more attractive terms and prioritize products with significant value add, thereby reducing exposure to price fluctuations in minor metals," said Mr. Tremblay.

"Profitability is increasing (both in margin and dollar terms) and 4Q17 results should confirm the achievement of the company's 2017 adjusted EBITDA target of US$21–27-million. We expect the positive profitability trend to continue and note management's adjusted EBITDA target of US$40–60-million for 2021 (the low end of the range should be achievable organically). We are also pleased to see a decline in earnings volatility; management is targeting a 50-per-cent reduction by 2019."

Believing its current valuation provides an attractive entry point for investors, Mr. Tremblay set a target of $4 per share. The average is $3.92.

"VNP trades at just 6.2 times and 5.6 times enterprise value-to-EBITDA based on our 2018 and 2019 estimates, respectively, near the bottom of its historical range of 5–9 times and at a large discount to peers — too low in our view, given the company's recent progress and constructive outlook," he said. "Our $4.00 target implies 7.5 times EV/EBITDA based on our 2019 estimates."

"Our Buy recommendation is supported by a 58-per-cent potential return to our target. We believe investors should take advantage of the current attractive entry point to accumulate VNP shares ahead of the company's achieving important milestones as part of its ongoing evolution."

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Though he believes it remains a high-quality company and sees a potential buying opportunity in 2018, National Bank Financial analyst Mike Parkin downgraded Agnico Eagle Mines Ltd. (AEM-T, AEM-N) to "sector perform" from "outperform."

Believing its 2018 expansion plans will require more capital than expected, Mr. Parkin lowered his financial projections for the year and reduced his target for the stock to $63 from $70. The average on the Street is $68.50.

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An opportunity has emerged with Lithium X Energy. Corp. (LIX-X), said Canaccord Genuity analyst Eric Zaunscherb, upgrading its stock to "speculative buy" from "buy."

"Recent weakness in the stock is fueled by speculation that the December 2017 announced deal with NextView Energy  is having trouble closing," he said. "Lithium X provided an update Thursday on the expected closing date. Originally slated to close in late February, LIX is now guiding to the first week of March. The company notes that the break fee of $20-million has been secured in escrow in Canada.

"NextView has advised LIX that it is seeking 'alternative funding from a commercial lender.' Likely looking to capitalize on lower Canadian lending rates, though the company will continue its search following the Chinese Lunar New Year. NextView has hinted at similar terms with their deal surrounding Bacanora  … which is a strategic position rather than an acquisition."

Mr. Zaunscherb kept a $2.61 target for the stock.

"The stock was off 10 per cent [on Thursday] closing at $2.30," he said. "If the deal were to close, which we continue to think is likely, one would realize a 13.5% return in roughly a one-month period. The return is what justifies our BUY rating which we qualify as SPECULATIVE due to uncertainties around final closing and to LIX's early stage project."

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AltaCorp Capital Inc. analyst Nicholas Lupick upgraded Cenovus Energy Inc. (CVE-T, CVE-N) to "outperform" from "sector perform" Mr. Lupick kept a $16 target for the stock, which is $1 more than the average on the Street.

Mr. Lupick said: "Despite the recent underperformance in the equity (and rising implied upside), we remain moderately cautious on Cenovus given: 1) the limited upside to the commodity near term given its hedging program; 2) the risk which could arise following the minimal Oil Sands sustaining capital in 2018; 3) the elevated (albeit improving) leverage profile and; 4) uncertain growth strategy with the Deep Basin. With this in mind, and the equity trading in the mid-$9-per-share range, we now believe that pessimism and conservative assumptions are reflected in the valuation. While we acknowledge that the next six months will be a weak period for the Company (with material heavy oil differential exposure and $570-million of hedging losses in H1/18), we believe that the stock's near-term weakness now warrants consideration for investors with a constructive longer-term outlook on the commodity and a longer-term investment horizon."

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In other analyst actions:

Argus Research analyst John M Eade downgraded Canadian National Railway Co. (CNI-N, CNR-T) to "hold" from "buy" with an unchanged target of US$88. The average on the Street is US$84.94.

Cormark Securities analyst Meny Grauman upgraded Laurentian Bank of Canada (LB-T) to "market perform" from "reduce" with a $51 target, which sits $7 below the consensus.

Cormark's David Tyerman upgraded Bombardier Inc. (BBD.B-T) to "market perform" from "reduce" and raised his target by 30 cents to $3.70. The average is $3.85.

Edward Jones analyst Andrew B Smith upgraded TransCanada Corp. (TRP-T, TRP-N) to "buy" from "hold."

Canaccord Genuity analyst Jenny Ma downgraded Canadian Real Estate Investment Trust (REF.UN-T) to "hold" from "buy." Ms. Ma raised her target to $53.75 from $52. The average is $52.25.

Societe Generale analyst John Herrlin upgraded Encana Corp. (ECA-T, ECA-N) to "buy" from "hold."

National Bank Financial initiated coverage of Cobalt 27 Capital Corp. (KBLT-X) with an "outperform" rating and $14.25 target. The average is $14.66.

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