Inside the Market’s roundup of some of today’s key analyst actions
Citi cut its price target on Marvell Technology Group Ltd. (MRVL-Q) after it forecast third-quarter revenue below estimates, as a ban on selling components to Chinese telecommunications giant Huawei Technologies Co Ltd hurt the U.S. chipmaker.
Analyst Atif Malik kept his “buy” rating on the stock but lowered his price target on the stock to US$29 from US$30. The median price target is US$27, according to Zack’s Investment Research.
“We cut F21/22 EPS by 13 per cent [and ] 9 per cent respectively on enterprise networking weakness. We lower our target price to US$29 from US$30 on consistent valuation using a 21 times P/E [price to earnings] on EPS [earnings per share] power of US$1.37. We previously valued using FY21 EPS and use average of FY21/22 EPS to reflect early stages of 5G,” the analyst said.
“We view MRVL as a key beneficiary of second wave of 5G cycle spend as carriers’ start to move to ASIC starting this year.”
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Canaccord Genuity raised its target price on Canadian Western Bank (CWB-T) after it reported strong third-quarter results with earnings per share beating Street expectations.
Analyst Scott Chan kept his “buy” rating on the bank and raised his target price to $34 from $32. The median is $32, according to Zack’s Investment Research.
“CWB reported strong FQ3 results with EPS exceeding Street expectations. We maintain our ‘buy’ rating and increase our target price to $34 per share (from $32) mainly from lowering our target discount to 5 per cent (from 10 per cent ) relative to peers,” he said.
“Historically, CWB has traded at a P/E (NTM) [price to earnings next 12 months] premium of 6 per cent relative to the Big-6. We believe CWB’s relative earnings growth metrics have improved evidenced by 9 per cent year over year EPS growth in FQ3. That said, management still expects F2019 EPS growth (CGe: +5 per cent) to fall slightly short of their 7 per cent-12 per cent EPS medium-term EPS growth target. For F2020E, we are more favourable on CWB’s earnings growth traction compared to peers. We continue to remain constructive on CWB stock due to: (1) double-digit loan growth outlook; (2) strong credit quality; (3) excess capital that will be significantly enhanced on transition to AIRB; and (4) trading at P/E (NTM) of 9.3x, which is a 20 per cent discount to its historical average,” he said.
“Our $34. target price is based on a 10 times P/E target multiple (from 9.5 times) applied to our F2020 EPS estimate of $3.43. Our target multiple represents a 5 times (from 10 times ) discount to the target multiple average of 10.5 times that Canaccord Genuity applies in valuing large Canadian banks.”
TD Securities raised its target price on the bank to $34 from $33.
Desjardins kept its “hold” rating and raised its target price to $34 from $33.
BMO kept its “outperformer” rating and $36 price target.
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Canaccord Genuity raised its price target on Laurentian Bank of Canada (LB-T) even as it reported adjusted earnings that slightly missed consensus estimates.
Analyst Scott Chan kept a “sell” rating on Laurentian but raised his price target to $36 from $35. The median is $46.
“Relative to CGe, we view results as lower quality, benefiting again from lower taxes and better credit. We maintain our 'sell’ rating and slightly increase our target price to $36 per share. (from $35), mainly from rolling forward our valuation one quarter. We made several adjustments to our model that were generally net neutral to our NTM EPS estimate. LB is the only Canadian bank trading above its historical P/E average and its relative valuation (vs. Big-6) continues to narrow (despite low earnings quality and growth metrics),” said the analyst.
“LB reported adjusted EPS of $1.15, slightly below consensus of $1.16 (CGe: $1.18). Relative to CGe, NII [non-interest income] came in above expectations (e.g. NIM [net interest margin] +8 bps quarter over quarter), but Other Income had a 10 per cent negative variance (mainly related to brokerage operations). Total NIX [non-interest expense] was larger (-5 per cent year over year), while total provisions for credit losses were lower (PCL ratio: 14 bps). Similar to last quarter, LB benefited from a lower adj. effective tax rate (about 13 per cent vs. CGe at about 16 per cent). Management stated lower taxes would persist in FQ4 and normalize in F2020,” he said.
“Our $36 target price is based on a 7.4 times P/E multiple (unchanged) applied to our F2020 EPS estimate (rolled forward one quarter) of $4.84. Our target multiple represents a 30 per cent discount to the target multiple average of 10.5 times that Canaccord Genuity applies in valuing large Canadian banks,” he said.
Desjardins kept its “hold” rating on the stock but lowered some estimates and kept its $44 price target.
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Canaccord Genuity cut its price target on Toronto-Dominion Bank (TD-T) after it reported earnings that met expectations.
Analyst Scott Chan kept his “buy” rating on the stock but cut his price target to $81 from $82. The median is $85.
“TD reported relatively neutral FQ3 results with adjusted EPS coming in line with consensus. We maintain our 'buy’ rating and slightly lower our target price to $81 per share (from $82). Our revised target price reflects lowering our NTM EPS estimate by <2 per cent, lowering our premium target multiple to 7 per cent (from 8 per cent), partially offset by rolling forward our valuation to F2020. We view TD shares attractively, trading at a P/E (NTM) of ~10 times representing a 10 per cent discount to its historical average,” he said.
“Our $81 target price is based on a 11.2 times P/E multiple (from 11.3 times) applied to our F2020 EPS estimate (rolled forward one quarter) of $7.19. Our target multiple represents a 7 per cent (from 8 per cent) premium to the target multiple average of 10.5 times that Canaccord Genuity applies in valuing large Canadian banks,” he said.
BMO downgraded TD to “market perform” from “outperform” and kept its $78 price target.
·"Cash operating EPS of $1.79 compared to our/consensus expectation of $1.80/$1.79. Relative to us, stronger results from Wholesale Banking (solid trading) and Wealth & Insurance were more than offset by weaker results in U.S. Retail and Canadian P&C (both on lower risk-adjusted NIMs), said analyst Sohrab Movahedi.
“Credit fundamentals remain intact with the total PCL ratio of 38bps (up 3bps y/y) including reserve building in the Canadian and U.S retail portfolios. CET1 ratio was an industry-leading 12.0 per cent,” he said. “We are downgrading the shares to Market Perform based on total return potential in line with other similarly rated banks.”
Desjardins lowered some estimates on TD but kept its “buy” rating and its $83 price target.
Scotiabank cut its target price to $80 from $83.
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Desjardins raised its target price on BRP Inc. (DOO-T) after it reported “solid second quarter results and again increased its FY20 guidance."
Analyst Benoit Poirier kept his “buy” rating on the recreational vehicle stock and raised his target price to $66 from $65. The median is $54.
“BRP continues to enjoy solid retail momentum across all product categories, a clear testament to the success of its strategy to introduce innovative products to the market. We maintain our bullish stance on BRP given its attractive valuation (1.5 times EV [enterprise value] /FY1 EBITDA [earnings before interest, taxes, depreciation and amortization] discount to Polaris), which does not reflect the company’s full growth potential across its diversified range of products,” he said.
In other analyst actions:
West Fraser Timber Co Ltd: Scotiabank cuts target price to $60 from $65
CAE upgraded to Sector Outperform at Scotiabank; PT $38
Pan American Silver raised to Outperform at NationalBank
Rogers Communications upgraded to Buy at Veritas; PT $68