Inside the Market’s roundup of some of today’s key analyst actions
Stifel analyst Ian Gillies sees an inflection point for the North American steel sector as “market sentiment is improving and a pickup in demand and pricing is anticipated starting in 1Q25.”
“Positively, a Trump administration is widely believed to be constructive for U.S. non-resi spending, helping drive a recovery in steel demand,” he said in a research report released Friday. “Our baseline assumption is that Canada will be excluded from steel tariffs, but it does present a significant tail risk to Algoma.
“To position heading into 2025, we view RUS as a lower risk alternative given its operations in both U.S. and Canada, with a distribution model that stands to benefit from higher pricing without tariff risk. We continue to like ASTL as a torquey play, and we believe EAF transition and M&A optionality remain the top two catalysts for the stock in the next 12-months.”
After introducing his 2026 estimates, Mr. Gillies raised his target for Algoma Steel Group Inc. (ASTL-T) to $22 from $20, which is the current average on the Street, with a “buy” rating.
“Algoma Steel is a growth stock as it is embarking on a capital investment up to $918-milliion (prior: $825-$875-million) to convert its BOF to an EAF,” he said. “This will likely increase the company’s effective production capacity by 0.7 mmtpa, or 25 per cent. It should also reduce the company’s risk related to a rising carbon tax in Canada. The company’s strong balance sheet and government support leave it well-positioned to fund this growth plan.”
His target for Russel Metals Inc. (RUS-T) increased to $57 from $54.50 also with a “buy” recommendation. The average is $49.92.
“We rate Russel Metals as Buy given what we view as its strong balance sheet and attractive valuation. The company’s Energy Products segment should also see improvements given the recovery being experienced in the North American energy sector. We believe the company’s significant cash position should also allow it to execute an active M&A strategy,” he said.
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National Bank Financial analyst Rabi Nizami sees NGEx Minerals Ltd. (NGEX-T) “well-funded for aggressive exploration for the next two to three years.”
In a research report released Friday, he initiated coverage of the Vancouver-based company with an “outperform” recommendation, touting its connection to the Lundin Group, which owns 36 per cent of shares, and its first-mover advantage in the exploration of the Vicuña District, which he calls “a rapidly emerging world-class mining region that hosts some of the largest copper-gold discoveries in the Andes.”
“Led by CEO Wojtek Wodziki, NGEx builds on its legacy as the core exploration team behind each of the major deposits that now define the district, including Josemaria and Filo del Sol, which began as discoveries under the NGEx banner and were spun out, and Lunahuasi and Los Helados which are NGEx’s focus today,” he said.
Mr. Nizami is “anticipating impactful results from “maximum growth” drilling at Lunahuasi, a copper-gold-silver project in San Juan Province, Argentina.
“The Lunahuasi project, discovered in April 2023, has quickly become a standout for its exceptional high-grade copper-gold-silver mineralization, with top intercepts rivalling its neighbouring Filo del Sol project, which was recently acquired for $4.5-billion,” he said. “The scale of the discovery is still unfolding, with several of the best intercepts located at the margins of what has been drilled. NGEX’s 2024/2025 ‘Maximum Growth’ drill campaign is targeting a systematic expansion of the discovery outward, with first results highly anticipated in Q4/24. This exploration phase mirrors the early period of sulfide drilling at Filo del Sol in 2021, as it matured into a globally significant porphyry. Similarly, we expect a period of rapid growth at Lunahuasi as imminent results hold the potential to quickly and meaningfully expand the scale of the discovery.”
In justifying his bullish stance, the analyst also pointed to Los Helados, a copper-gold project in Chile’s Region II, as “an attractive M&A development opportunity to integrate with Caserones” and “supportive market dynamics as NGEx gains more attention through an addition to the S&P/TSX Composite Index in December, closing of the Filo Corp. acquisition and redeployment of up to $2.8 billion cash by its shareholders in ~Q1/25; and news from BHP/Lundin Mining or other major participants as they optimize an engineering framework for developing the Vicuña district and this could spur further M&A consolidation, ideally in the two-year timeframe triggered by Argentina’s new RIGI policy.”
He set a target of $17 per share. The average target on the Street is $14.20.
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Desjardins Securities analyst Benoit Poirier lowered his expectations for BRP Inc. (DOO-T) ahead of the release of its third-quarter results on Dec. 6, predicting a “prolonged industry inventory reset will keep shipments depressed” and calling its current fiscal year “a write-off.”
“We now forecast relatively unchanged revenue in FY26 assuming flat shipments year-over-year (small step-up in ORV deliveries offset by lower PWC and snowmobile shipments),” he said. “We have also decreased our gross margin estimate to 27.1 per cent (from 28.1 per cent previously) as we expect that OEMs are going to have to work harder to push the bubble through the hose (greater incentives). These changes result in EPS of only $4.61 in FY26 (down from $6.03), which implies 18-per-cent year-over-year growth.”
In a note released Friday titled “Where Is the Love?”; time to analyze a downside scenario, Mr. Poirier concluded “powersports industry is oversaturated with participants — an adjustment was needed and natural selection will ultimately make the ecosystem a better place for BRP.”
“In light of the more difficult market conditions recently, we believe it is now fair to assume that many smaller and financially weaker players will end up being forced out of the industry, similar to what occurred in the snowmobiles ecosystem,” he said. “We believe natural selection will eventually leave the powersports industry stronger and better. BRP currently has 60-per-cent-plus market share in PWCs and snowmobiles, and if bankruptcies begin to occur in the ORV space, we believe that its market share in SSVs (currently at 30 per cent) could increase. Moreover, this reinforces our thesis that smaller players will have a hard time competing against BRP’s superior innovation, investment and best-in-class dealer proposition (eg Honda, Arctic Cat and Polaris have all exited the PWC segment over the last 25 years). It has been our longstanding belief that the industry is oversaturated with participants and that numerous brands fail to generate sufficient revenue to sustain their viability.”
The analyst now sees market support for the BRP at its current share price. It closed at $67.58 on Thursday.
“Given BRP’s recent negative share price performance (down 28 per cent over the last three months), we have received an increased volume of inbound calls from investors asking about the level at which we could see support building,” said Mr. Poirier. “For some context, BRP is currently trading at 12 times FY26 EPS consensus of $5.72— however, as we mentioned ... this number is not fully representative of market expectations due to unrevised estimates and noise from the Marine divestiture. If we assume a more realistic EPS number in the ballpark of $4.50 (in line with the now more depressed powersports market conditions), this implies that BRP is trading at 15 times P/E FY2 (near the sd +1 level). Over time, BRP’s implied valuation multiple has ticked up as EPS estimates for FY26 continue to fall . A similar phenomenon is playing out in the trucking space, where cyclical truckload names such as Knight-Swift have experienced sharp multiple expansion in recent months as investors ignore the depressed earnings revisions and try to front-run and price on a potential inflection in the future. Putting all of this together, we would caution investors with regard to venturing too low on the multiple as BRP did trade above 14–15 times P/E FY2 for some periods during 2017–18 and during COVID-19 from 2019–21. To conclude, a 15 times multiple on depressed/trough earnings in FY26 is not a stretch, in our view. Applying this 15 times on our revised forecast of $4.61, we derive a current support level of $69/share, which is close to where the stock is currently trading.”
Maintaining his “hold” rating for BRP shares, Mr. Poirier cut his target to $81 from $96 based on his reduced projections. The average on the Street is $92.33.
“While the macro is not compelling at the moment, if the quarter comes in weaker than expected (DOO is scheduled to report on December 6) and the stock sells off into year-end (under the pressure of tax-loss selling and index exclusion), we believe the levels [of $54–58/share] provide an excellent point to begin revisiting the name,” he said. “Moreover, the potential bankruptcy/exit of certain peers could provide a nice boost/cherry on top for growth if the bankruptcies materialize.”
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TD Cowen analyst David Kwan initiated coverage of Vitalhub Corp. (VHI-T) with a “buy” recommendation, seeing it a “building a healthcare software powerhouse.”
“We believe Vitalhub should continue to disproportionately benefit from the increased pace of digital transformation in the healthcare sector, as evidenced by its consistent 15-20-per-cent-plus year-over-year organic growth in recent years,” he said. “We expect its Rule of 40 performances to continue, with growth further augmented by its active M&A program. Despite the more than 150-per-cent surge in its stock year-to-date, we see more upside ahead.”
Mr. Kwan said the Toronto-based software for health and human services provider has been aided by 20 acquisitions since late 2017, building “a comprehensive suite of more than 50 different healthcare software solutions that it sells to its more than 1,000 customers, including hospitals and regional/community healthcare provider.”
He also touted the potential gains from the implementation of its Shrewd operational management platform.
“Our due diligence suggests Vitalhub’s work during the pandemic to quickly implement a national healthcare monitoring framework (OPEL) with its SHREWD solution helped it gain recognition at the NHS and Department of Health,” he said. “We believe this goodwill should help it continue to gain share in its largest market. Strong organic and M&A-driven growth expected to continue.
“Vitalhub has generated consistent 20-30-per-cent-plus year-over-year revenue growth, including 15-20-per-cent-plus year-over-year organic growth. M&A is expected to remain a key growth driver and near-term catalyst. With more than $50-milion in cash, solid FCF (more than $20-million last 12 months), and an unused $27-million revolver, Vitalhub is poised to remain active on the M&A front. It just closed its largest acquisition to-date (Strata Health – $32-million), with it targeting more large deals, which we believe increases M&A/integration risk. Vitalhub has built up its corporate infrastructure and will rely on its proven M&A playbook, including its Sri Lankan Innovations Lab (more than 50-per-cent cost savings) to help mitigate these risks.”
Calling it “ready for prime time,” Mr. Kwan set a $13 target for its shares. The average is currently $13.33.
“Led by an experienced management team with significant insider ownership (21-per-cent stake), we believe Vitalhub is on track to be a star performer on a larger stage, as it continues to execute well on its high growth and profitable roll-up strategy,” he said.
“Despite the surge in the stock this year, we believe there is more upside, especially if M&A activity remains strong.”
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“Despite some growing optimism,” the market for Real Matters Inc. (REAL-T) is “still challenged,” said National Bank Financial analyst Richard Tse following the release of weaker-than-anticipated fourth-quarter results, emphasizing “volumes have yet to fully turn given in part to some uncertainty around rates.”
Before the bell on Thursday, the Toronto-based company, which operates a technology and networking platform that provides title-search and appraisal services to the mortgage-lending and insurance industries, reported consolidated net revenue of $12.0-million, up 8 per cent year-over-year but below both Mr. Tse’s estimate of $13-million and the consensus expectation of $12.9-million due to a “softer” U.S. Appraisals segment. Adj. EBITDA of $0.6-million also fell short of projections ($1-million and $0.9-million, respectively).
“With respect to the notable highlights in the quarter, Real Matters gained share with three of its top U.S. Appraisal clients on a year-over-year basis while launching three new clients in U.S. T&C (one of which is a Tier 2 lender),” the analyst said. “In Canada, the Company also launched an additional three new clients and one new channel. And with respect to the next leg of growth market of T&C, Real Matters noted it’s waiting on a completed RFP with a Tier 1 lender that should be awarded over the coming weeks (by CY24 end) with another RFP in the process that could be awarded in CQ1′25 (FQ2′25). Of note, Real Matters currently has one Tier 1 lending partner in T&C and adding another would approximately double the existing Tier 1 volume/revenue.”
Mr. Tse said Real Matters’ U.S. Appraisals segment is continuing to gain share with Tier 1s and sees a “incremental growth opportunity” for its U.S. Title business, leading to “optimism into calendar 2025.”
“The Mortgage Bankers Association (MBA) forecast points to a reacceleration in mortgage purchase originations beginning in FH2′25 (CQ2 & CQ3′25), with year-over-year growth rates approaching 10 per cent after being either flat or negative for several quarters,” he said. “A moderating Fed backdrop should further support the MBA forecasts. Lastly, as mentioned, the growing pool of re-fi candidates where 8 million outstanding mortgages at a mortgage rate more than 6 per cent should provide further footing for optimism for an inflection in volumes. For context, that 8 million represents 2 times total 2023 mortgage volumes (for purchase and re-fi). Given that backdrop, Real Matters believes Tier 1s are wading back into the market. That’s notable as Real Matters is most levered to Tier 1s where it holds the strongest market share positions.”
Reiterating a “sector perform” recommendation for its shares, Mr. Tse trimmed his target to $7 from $9. The average is $8.54.
“We’re continuing our pause on REAL following our downgrade this past summer to Sector Perform as we believe the strong move in the stock at that point had priced in a robust outlook,” he noted.
Elsewhere, others making adjustments include:
* Raymond James’ Steven Li to $9 from $10.50 with an “outperform” rating.
“REAL missed F4Q analysts’ consensus given there was no volume spike in the Sept quarter despite the first Feds rate cut,” said Mr. Li. “With the U.S. 10 Year Treasury yield adding 75bps since that first cut, we are resetting our model to reflect a more conservative F1H25 and F2026.”
* BMO’s Thanos Moschopoulos to $7 from $7.50 with a “market perform” rating.
“We remain Market Perform on REAL and have trimmed our target price following Q4/24 results, which were below consensus, due to softness in US Appraisal volumes. We’ve reduced our FY2025 EBITDA estimate. While we expect significant revenue and EBITDA growth in FY2025/26 on the assumption of a more favorable rate environment (and helped by REAL’s consistent execution on both market share and costs/margins), we view the stock as fairly valued relative to our forecasts and the potential risk that mortgage rates could stay higher for longer,” he said.
* Canaccord Genuity’s Robert Young to $8.50 from $10 with a “buy” rating.
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In other analyst actions:
* Calling it “a story in flux,” Needham’s Tom Mikic initiated coverage of Lululemon Athletica Inc. (LULU-Q) with a “hold” rating.
* CIBC’s Cosmos Chiu initiated coverage of Aya Gold & Silver Inc. (AYA-T) with an “outperform” rating and $24 target. The average is $21.81.
“Aya Gold & Silver is a growing silver producer, at a time when investors are faced with diminishing choices for investable silver ideas given recent M&A activity,” he said. “The silver sector is undergoing a transition period, in that single‑asset producers with attractive upside are being acquired at premium multiples of close to 1.8 times P/NAV. These transactions shine a spotlight on the longstanding scarcity of primary silver producers, which has historically led to premium multiples (42-per-cent premium on NAV and 64-per-cent premium on cash flow, vs. gold producers).”
“Aya stands out among the silver producers that remain, with the near‑term completion of the Zgounder expansion (100-per-cent silver) increasing annual silver production to +8Moz at AISC of $13/oz at steady state by 2026. With Zgounder, Aya is the only company in our coverage universe with 100 per cent of its revenue generated from silver. Beyond Zgounder, Aya’s portfolio of assets is headlined by Boumadine, where the Aya team has more than doubled the size of the deposit to 352 million silver-equivalent ounces (including 72Moz of silver). The recent proposal to spin out non-core gold assets into Mx2 Mining (to be led by the former team of Red Back Mining) could further unlock value from the portfolio.””
* National Bank’s Don DeMarco trimmed his target for Allied Gold Corp. (AAUC-T) to $7.75 from $8 with an “outperform” rating. The average is $7.44.
* In a report on the uranium industry, Raymond James’ Brian MacArthur increased his targets for Cameco Corp. (CCO-T, “outperform”) to $88 from $81, Denison Mines Corp. (DML-T, “outperform”) to $3.90 from $3.50 and NexGen Energy Ltd. (NXE-T, “outperform”) to $15 from $13.50. The averages are $80.53, $3.98 and $13.95, respectively.
‘We believe the combination of growing uncovered demand (which is a function of consumption plus inventory policy), security of supply concerns given the concentrated supply and current geopolitical situation, long lead times for greenfield production and the fact some greenfield projects would need higher uranium prices, and financial interest is positive for the uranium market, and we have increased our long term uranium price forecast to US$85/lb from US$80/lb,” he said. “We have also increased the target prices for our uranium coverage (CCO, DML, NXE) given these higher uranium price forecasts.”
* Eight Capital’s Ralph Profiti bumped his Capstone Copper Corp. (CS-T) target to $15 from $14 with a “buy” rating. The average is $13.45.
* Scotia’s Jonathan Goldman raised his CCL Industries Inc. (CCL.B-T) target by $1 to $85 with a “sector outperform” rating. The average is $89.80.
“We hosted an NDR in Toronto last week with CCL President and CEO Geoff Martin and SVP and CFO Sean Washchuk,” he said. “The conversations centered on the near-term outlook in the Core label business; the runway in RFID; and M&A. We continue to recommend CCL as a core holding in a diversified portfolio given its defensive end-market exposure (effectively a royalty on deodorant, beer, and clothes) and high FCF generative profile ($700-million per year). We peg normalized EBITDA/share growth at 7 per cent consisting of GDP (2 per cent), growth above market, such as RFID (1 per cent), and share repurchases (4 percent). Moreover, we believe investors are getting a free option on M&A, tuck-ins and large transactions, which remains the top capital-allocation priority. The company has an active list of targets and ample dry powder (net debt to EBITDA 1.1 times), but deal flow can be lumpy given the company’s disciplined M&A approach (pays 4.5 times to 6 times for smaller deals; 6.5 times to 7.5 times for larger transactions).”
* BMO’s Tamy Chen raised her Dollarama Inc. (DOL-T) target to $154 from $147 with an “outperform” rating. The average on the Street is $143.64.
“DOL reports FQ3/25E on December 4 before market,” she said. “Our second proprietary consumer survey suggests SSS [same-store sales] normalization remains gradual, which is in line with our and the Street forecasts but perhaps slightly positive for investors cautious on how SSS is trending since last quarter. We did trim our gross margin forecast for H2/F2025E. ... We continue to like the fundamentals medium term but note that, near term, valuation has increased materially to 21 times F2026E EBITDA from the last four-year range of 15–18 times.”
* TD’s Tim James lowered his FirstService Corp. (FSV-Q, FSV-T) target to US$192 from US$194, below the US$197 average, with a “hold” rating.
“Slightly lower forecasts reflect the release/implementation of complete Q3/24 financial disclosures and other minor modelling updates, and does not reflect any change in our view of underlying demand/opportunities/margins. We estimate FirstService will continue to grow organic revenue at mid-single digits over the long-term,” he said,
* Raymond James’ Michael Freeman increased his target for HLS Therapeutics Inc. (HLS-T) to $5 from $4 with a “market perform” rating. The average is $5.65.
“Following 3Q24 earnings, we see HLS refining and improving its cost structure to suit what may be moderate (vs. hockey stick) growth of its Vascepa asset in the medium term, making particularly important strides through the termination of its co-promotion agreement with Pfizer. We see these cost reductions materially improving HLS’s adj. EBITDA profile, which we view positively. While the company does continue to see Vascepa grow steadily, we believe HLS’s platform is now much better situated to balance growth and profitability, where it previously assumed aggressive growth, which has not (yet) been forthcoming. HLS’s refreshed management team has done well to apply solid financial discipline to the organization such that the story has the potential to work on quasi-linear Rev. growth rather than relying on quasi-exponential,” said Mr. Freeman.
* Canaccord Genuity’s Doug Taylor raised his Kraken Robotics Inc. (PNG-X) target to $2.50 from $2 with a “buy” rating. The average is $2.58.
* Following the private placement of a $175-million senior secured green bond, National Bank’s Rupert Merer increased his Polaris Renewable Energy Inc. (PIF-T) target to $23 from $20 with an “outperform” rating. The average is $23.42.
“PIF continues to make the right moves to diversify the business, optimize its existing footprint and add flexibility to its balance sheet,” he said. “With this, we raise our target ... based on a long-term DCF with a 12.5-per-cent discount rate (was 13 per cent), driven by lower country risk premium (with its diversification), and a lower 12-month forecast for the Cda 10-yr bond (now 2.65 per cent, was 2.95 per cent). If PIF shares do not re-rate over the medium term, we would not be surprised to see private equity interest.”