Inside the Market’s roundup of some of today’s key analyst actions
Canaccord Genuity analyst Luke Hannan reiterated a “buy” rating and increased his target price on Aritzia Inc. (ATZ-T) to $42 from $40 ahead of the retailer’s fiscal first quarter 2025 results after markets close on July 11.
For the quarter, Canaccord is forecasting revenue of $491 million, above the consensus forecast of $486 million. Its EBITDA forecast of $45 million is in line with the consensus estimate.
Mr. Hannan’s new price target represents 15.1x his fiscal 2025 EBITDA estimate of $360 million (previously 14.9x his 2025 EBITDA estimate of $349 million). His valuation for Aritzia represents a premium to lifestyle brand peers, who trade at an average of about 11x their respective EV/EBITDA estimates.
“In our view, Aritzia has done a good job of navigating a changing retail landscape by offering an aspirational customer experience within its brick-and-mortar locations and an improved e-commerce platform. With a healthy track record of comparable sales growth, a robust pipeline of new selling square footage coming online, and a healthy balance sheet to support growth and margin enhancement initiatives, we believe Aritzia is deserving of a premium valuation,” Mr. Hannan said in a note to clients.
“Looking further ahead, we remain bullish on Aritzia’s prospects particularly the second half of 2025 due to (1) 20-25% square footage growth expected to come online in late Q3/early Q4, (2) improved visibility into free cash flow generation with major capital projects complete, and (3) operating leverage on selling, general, and administrative expenses. We also believe the summer selling season is gaining momentum as credit card spending data from Bloomberg shows a strong increase in US sales starting in the middle of June.”
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Analysts are looking favourably on Teck Resources Ltd.’s (TECK-B-T) release of higher-than-expected second quarter coal sales and a report that the company’s sale of 77 per cent of its coal business is poised to be approved by the Canadian government.
Teck said late Thursday it sold 6.4 million tons of coal versus a forecast from Canaccord Genuity of 6.1 million. The realized price of US$237 per ton was a 6 per cent discount to benchmark coal pricing, less than a typical discount of 8-10 per cent.
Meanwhile, the Globe & Mail reported that the sale of Teck’s 77 per cent stake in the coal business to Glencore plc is on the cusp of being approved by Innovation, Science and Economic Development Canada.
A number of conditions were outlined by the government. They include: • Maintaining a head-office in Vancouver for the coal business for at least 10 years. • The coal business must maintain a board that has a majority representation by Canadians, and at least two-thirds of the executive and senior management ranks must be Canadian. • Glencore will also be responsible for payment of all environmental obligations stemming from the acquisition through to 2050.
“We note that these conditions are incremental to those set out by Glencore as part of the original transaction, but we do not believe any of these are deal-breakers,” commented Canaccord analyst Dalton Baretto.
Mr. Baretto maintained a “buy” rating on Teck and reiterated his $80 target price.
National Bank Financial analyst Shane Nagle reiterated an “outperform” rating and $82.50 price target.
He commented, “Overall, the beat in sales volumes, realized prices and accounting for negative provisional pricing adjustments is expected to have a modest net positive impact of $11 mln to our current Q2/24 EBITDA estimate of $1.882 bln.”
Elsewhere on the Street, BofA Global Research cut its price objective on Teck to $87 from $88.
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Raymond James analyst Michael Glen downgraded 5N Plus Inc. (VNP-T) to “outperform” from “strong buy” while raising his price target to C$7.50 from $7.
The move follows recent gains in the stock. “We can see that 5N Plus has now recovered to what we would view as more reasonable levels, at just over 10x our 2024E EBITDA,” said Mr. Glen in a note to clients.
“The drivers for the performance/multiple expansion of 5N Plus has been a recognition from investors of the longer-term secular tailwinds impacting the business, namely with respect to AZUR Space and First Solar.”
The analyst said he continues to see a number of positive items impacting the business over the next two years, which he outlined as follows in the note:
- VNP’s large / primary solar relationship is with First Solar (FSLR US), which has a 6-year backlog and provides utility-scale solar installations (i.e. as opposed to residential);
- VNP’s minimum contracted volumes with FSLR were +35% in 2023 and forecast at +100% in 2024 (from 2022 levels), with the recent renewal from early June indicating a 50% increase in volume over 2025/2026 compared to the previous agreement.
- AZUR, VNP’s space solar business, is currently benefiting from a strong demand backdrop (bookings are taking place in 2026+), and currently rests with a 2+ year backlog that incorporates improved margins.
- As a whole, 5N Plus sees a rather large opportunity for margin expansion internally, and has spoken to the potential for a 35% gross margin over the next 2-years as optimization efforts flow through and revenue continues to grow.
- In terms of the balance sheet, leverage remains quite moderate with net debt / adj. EBITDA = 2.0x and should continue to trend lower through 2024.
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Scotia analyst Phil Hardie is maintaining a $200 price target and “sector perform” rating on Goeasy Ltd. (GSY-T) after Jason Mullins made a surprise decision to step down as CEO at year-end.
Mr. Mullins served as CEO for nearly six years and has been with the company for 14 years. He received the 2020 Canada’s Top 40 Under 40 award.
“The development is likely to be received with some trepidation by investors and be a negative to near-term investor sentiment, however we view the six-month transition and Mr. Mullins’ intention to remain on the board as key mitigating factors from a fundamental perspective,” Mr. Hardie said in a note to clients.
“Further, his decision to step down comes at a time when the company is running well with a strong growth outlook, which we view as highly preferable to leaving the company in a weak position. We believe the board will consider internal and external candidates as a successor. We view an external candidate as the most likely scenario but do not expect any major change in the company’s strategic direction or outlook, or a pivot in culture. Given the company’s solid operating momentum and orderly transition plan, we expect a relatively smooth changeover,” the Scotia analyst added.
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In other analyst actions:
Ascot Resources Ltd (AOT-T): CIBC cuts target price to C$0.60 from C$0.85
Kits Eyecare Ltd (KITS-T): Roth MKM raises target price to C$11.25 from C$9.50
Lion One Metals Ltd (LIO-X): Eight Capital cuts target price to C$0.75 from C$3
Pembina Pipeline Corp (PPL-T): TPH Energy Research raises target price to C$56 from C$55
Constellation Brands (STZ-N): Barclays cuts target price to US$287 from US$292 while Jefferies raises target price to US$311 from US$310