Inside the Market’’s roundup of some of today’s key analyst actions
While Alimentation Couche-Tard Inc. (ATD-T) reported “lacklustre” first-quarter fiscal 2025 financial results, investor attention is likely to remain fully focused on its potential acquisition of Seven & i Holdings Co., Ltd., according to Stifel’s Martin Landry.
In a research report released prior to the Friday announcement from the Japanese parent of the 7-Eleven chain that has rejected a bid the from Canadian convenience-store giant, the equity analyst said he views the potential acquisition favorably given “(1) the significant accretion potential which could exceed 20 per cent including synergies, (2) the scale and reach it could bring to ATD, particularly in Asia and (3) the strong brand awareness of 7-Eleven.”
“However, the extremely large size of the transaction (10 times larger than ATD’s largest transaction ever) brings uncertainty with regard to financing, financial leverage and execution risk,” he added. “Discussions could be lengthy before an agreement is reached and hence, this overhang could remain for months. Despite this, we believe investors should stay invested as the potential outcome could be very appealing.”
“Media reports suggest that Seven & I will ask Couche-Tard to revise upwards its offer price. We view this openness to negotiations by Seven & I as a positive development increasing the likelihood of a transaction. Seven & I’s investors appear to see the likelihood for a transaction to occur given the stock price is up 24 per cent since the announcement. An acquisition of Seven & I would be highly synergistic and strategic for Couche-Tard, increasing the company’s scale significantly and broadening its reached in Asia.”
In analyzing potential implications moving forward, Mr. Landry thinks any deal could take 12-18 months to close, allowing investors to “position themselves ahead of closing to benefit from the earnings growth.” However, he ascribes a 60-per-cent probability to the chance that there is no transaction.
“Under this scenario, the risk profile is much lower which could reassure some investors. Couche-Tard would continue to look at smaller M&A transactions while buying back its shares. While the earnings growth may not be as explosive as with scenario 1 [in which an agreement is reached], there is still a possibility for the company to reach its FY2028 goal of $10 billion in EBITDA,” he said. “The FY2028 goals would translate into double-digit EPS growth rates, more than enough to satisfy investors, given the lower risk profile. We believe that the shares would continue their long-term upward trajectory albeit at a slower pace than under scenario 1. Assuming that ATD is on track to achieve its $10 billion EBITDA, we could see a valuation of $98.00 to be reflected in calendar 2026″
Maintaining a “buy” rating for Couche-Tard shares, Mr. Landry raised his target to $88 from $86 after increasing his fiscal 2026 estimates by 7 per cent. The average target on the Street is $92.85, according to LSEG data.
“We now include the contribution from the recently acquired GetGo network as well as a larger contribution from ATD’s European operations following a good quarter from Total Energies,” he said. “We have removed further buybacks from our model in FY25 until we get clarity on the Seven & I acquisition.”
Elsewhere, others making target changes include:
* National Bank’s Vishal Shreedhar to $85 from $86 with a “sector perform” rating.
“We view results to be tepid given a miss across many key metrics. Relative to NBF expectations, merchandising was the most significant source of underperformance,” he said.
“If ATD achieves its F2028 targets, upside remains. That said, recent lacklustre merchandising trends call into question ATD’s aggressive plans under its ‘10 For The Win’ strategy. Perhaps this shortfall has motivated ATD to accelerate acquisitions. We await more clarity on ATD’s organic growth trajectory.”
* Desjardins Securities’ Chris Li to $84 from $85 with a “buy” rating.
“1Q results reflected ongoing macro pressures weighing on merchandise SSSG [same-store sales growth] and margins,” he said. “While we expect macro headwinds to keep the stock range-bound in the near term, we see this as mostly transitory. We continue to expect 13-per-cent EPS growth next year (FY26), mainly predicated on better macro conditions in the U.S., continuing execution of ATD’s strong pipeline of organic growth initiatives and share buybacks (assuming no large M&A deals). Clarity on ATD’s proposal to acquire Seven & i is also a key catalyst.”
“We expect ATD to remain range-bound until macro conditions improve and there is more clarity on 7-Eleven. Our positive view is based on ATD’s attractive long-term growth and strong financial position.”
* CIBC’s Mark Petrie to $88 from $85 with an “outperformer” rating.
“Slower organic growth highlights the challenge ATD faces in the form of more cautious consumer spending,” said Mr. Petrie. We believe the company is navigating well and leveraging core strengths – beverages, loyalty, operating discipline – to mitigate the impact. Even still, our F2025 growth expectations moderate. After a blip in late F2024, fuel is a bright spot and we revise our long-term U.S. margin assumption to 42cpg [cents per gallon] to reflect the industry’s rationality and ATD’s strength. Seven & i remains in range, albeit with significant uncertainty, and this could cap share price performance in the near term. We view a deal positively.”
* Canaccord Genuity’s Luke Hannan to $83 from $85 with a “buy” rating.
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Citing “the positive total return performance due to a change in the interest rate environment in 3Q24,” Raymond James analyst Brad Sturges increased his price targets for Canadian REIT/REOCs his coverage universe by a “modest” 3 per cent on average on Friday.
“Canadian REIT/REOC market valuations remain attractive even after relative outperformance in recent weeks,” he said.
“The average NAV estimate discount for covered Canadian REIT/REOC is forecasted at 17 per cent, which compares to a 5-year historical average NAV estimate discount of 14 per cent. We highlight that large-cap Canadian REIT/REOCs under coverage now trade at an average 11-per-cent NAV estimate discount, while small-cap Canadian REIT/REOCs remain more deeply discounted (average NAV estimate discount: 22 per cent). We highlight Parkit Enterprises Inc. (Parkit), StorageVault Canada Inc. (StorageVault), NexLiving Communities Inc. (Nexliving), PROREIT, and InterRent as covered real estate stocks that are trading well below their respective 5-year average premium or discount relative to estimated NAVs. Canadian REIT/REOCs across our coverage universe (excluding micro-cap, Parkit) continue to trade at an 3 times lower P/AFFO versus their 5-year historical average. Notably, NexLiving, Allied, InterRent, StorageVault, and Minto currently trade between 6 times to 10 times below their respective 5-year historical averages on a P/AFFO multiple.”
“Our preferred Canadian property sector rankings include: 1) Canadian multifamily rental (MFR); 2) industrial; 3) retail; 4) U.S. residential; 5) storage; and 6) office.”
Mr. Sturges made a pair of recommendation changes on Friday.
* Boardwalk REIT (BEI.UN-T) to “outperform” from “strong buy” with a $100 target, up from $96. The average on the Street is $91.20.
“Boardwalk’s rating [is] adjusted to outperform after strong total return performance in the past 2 years,” he said. “Boardwalk’s above-average near-term NAV/unit and 2025E AFFO/unit growth prospects now appear to be more fairly valued after significantly outperforming the broader Canadian REIT/REOC sector in 2023 and 2024 YTD, with Boardwalk trading in-line with its NAV/unit estimate of $86.50 per unit (utilizing a 5.25-per-cent average applied cap rate). That said, our new Outperform rating for Boardwalk reflects: 1) above-average near-term SP-NOI growth prospects driven by further market MFR rent growth in Western Canada, and its SP-NOI margin expansion potential; 2) greater non-regulated MFR market exposure (73 per cent of suites); and 3) above-average exposure to Canada’s more affordable MFR markets, among other factors.”
* Killam Apartment REIT (KMP.UN-T) to “strong buy” from “outperform” with a $24 target, up from $22.25. Average: $22.60.
“Killam’s rating increased to strong buy due to its improved 2025 FD AFFO per unit growth profile,” he said. “After a relatively slower AFFO/unit growth year expected in 2024, we are forecasting Killam to generate low-double-digit 2025E FD AFFO/unit growth year-over, driven by capturing the REIT’s embedded rent MTM growth opportunity of 25 per cent at June 30, combined with greater NOI contribution from the lease-up of non-stabilized, recently completed development projects, and reduced financing cost headwinds expected next year. Further, we view Killam’s relative valuation to be attractive, trading at an 9-per-cent discount to our NAV/unit estimate of $22.50/unit, and at 18 times 2025E AFFO, or 3-4 times lower than the simple average of 22 times for its large-cap Cdn MFR REIT peers.”
The analyst added: “Our Strong Buy rated stocks include Flagship, Granite, InterRent, and Killam. We also highlight Outperform rated stocks Crombie, DIR, NexLiving, Primaris, and PROREIT to round out our current list of preferred stocks,” he said. “Our preferred Canadian REITs generally feature strong balance sheets (e.g., low financial leverage, ample balance sheet liquidity, and limited floating rate debt), below-average AFFO/unit payout ratios, portfolios weighted towards ‘high-growth’ markets, above-average organic and AFFO/unit growth prospects, NAV/unit and AFFO/unit discount valuations, and may benefit from 1 or more near-term positive catalysts.
“We believe the vast majority of Canadian REIT total return performance in 2024 YTD has been driven by a positive change in the interest rate environment. While tactically we believe interest rates could remain a near-term tailwind for Canadian REIT/REOC valuations, we expect investor focus to shift back to Canadian economic and underlying property fundamentals. We maintain our belief that the dislocation between public unit prices and underlying estimated NAVs may once again prove to be a very attractive buying opportunity. Key potential near-term positive catalysts to keep in mind for the Canadian REIT sector include: perceived lower investment risk of a deeper economic recession in Canada; further interest rate cuts by the Bank of Canada (BoC) and the Federal Reserve (the Fed); increasing transactional activity in the direct property market that validates estimated NAVs; positive SP-NOI and AFFO/unit surprises; and potential Canadian REIT/REOC M&A/privatization transactions.”
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National Bank Financial analyst John Shao sees D2L Inc. (DTOL-T) “positioned for a valuation re-rating” in the wake of the Toronto-based education technology company reporting second-quarter financial results that displayed “solid execution in growing its global presence and more importantly solidifies margin expansion as an important catalyst in the second half of the fiscal year.
After the bell on Wednesday, D2L reported a “clean” quarter with both revenue and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) exceeding his expectations ($49.2-million and $4.2-million, respectively, versus $48.6-million and $2.8-million). The company also raised its annual guidance.
“All in all, we believe D2L is executing its balanced growth strategy well and is on track to maintain double-digit growth while expanding its profit margins,” said Mr. Shao. “If anything, FQ2 represents the kind of quarter with solid performance to potentially narrow the valuation gap relative to peers.”
“Despite the 20-per-cent year-to-date return, we’d note the stock is still trading at a discount to its LMS [learning management system] peers. As the Company captures more market share and grows its bottom line, that valuation gap should narrow. We continue to like D2L for its strong attributes such as a high recurring stream and a stable but robust customer base.”
Reiterating his “outperform” recommendation for its shares, Mr. Shao increased his target to $16 from $14.50. The average target is $15.56.
Other analysts making adjustments include:
* TD Securities’ Daniel Chan to $15 from $13 with a “buy” rating.
“D2L continues to execute well as product innovations are resonating with new and existing customers, in addition to cross-sell momentum with H5P,” he said. “We believe this sets the company up for growth acceleration, continued margin expansion, and improved FCF, all supporting multiple upside. Trading at 2.0 times forward sales, we believe the company remains undervalued.”
* Stifel’s Suthan Sukumar to $17 from $16 with a “buy” rating.
“RFP activity industry wide remains muted amidst macro uncertainty but D2L is seeing high win rates sustain and healthy pipeline build as they leverage a differentiated product-platform offering to grow market share gains vs. peers, while improving operating leverage fuels greater margin expansion and cash flows, allowing the company to comfortably double-down down on key growth drivers – product innovation, international penetration, and corporate learning – which drive continued prospects for upside,” he said. “Net/net - we believe D2L appears well-positioned to drive transformation of the future of learning/work and we continue to see a potential outlook for durable double-digit revenue growth and stronger EBITDA/FCF expansion, which suggests a rule-of-40 profile may be closer than appears.”
* RBC’s Paul Treiber to $16 from $15 with an “outperform” rating.
“Profitability in D2L’s fiscal Q2 (July quarter) reached the 2nd highest level in the company’s history and was better than expected. Revised FY25 guidance calls for further margin expansion. While Q2 revenue was largely in line with RBC/ consensus, visibility to sustained low-double-digit growth is high, given D2L’s share gains, the recovering EdTech market, and new products. Maintain Outperform, given D2L’s discounted valuation and our forecast for adj. EPS to grow 51 per cent year-over-year from CY24 to CY25,” said Mr. Treiber.
* BMO’s Thanos Moschopoulos to $14.50 from $14 with a “market perform” rating.
“We remain Market Perform on D2L and have modestly raised our estimates following Q4/25 results — which were in line on revenue and a beat on EBITDA,” said Mr. Moschopoulos. “D2L modestly raised FY2025 guidance, reflecting the recent H5P acquisition (for which it’s already starting to capture some revenue synergies). While we prefer other stocks in our coverage universe, we see more upside than downside to the stock given D2L’s valuation, strong competitive position in higher-ed, and ramping profitability.”
* Canaccord Genuity’s Doug Taylor to $14.50 from $13.50 with a “buy” rating.
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Wrapping up third-quarter earnings season for Canadian banks, CIBC World Markets analyst Paul Holden raised his target prices for stocks in his coverage universe.
“The big banks delivered more EPS beats than misses as credit losses increased less than expected for the majority of banks,” he concluded. “We can’t sound the all clear on credit risk just yet, with BMO being the obvious case in point, but we are less concerned about F2025 credit losses and associated EPS downside today than we were prior to reporting. We have not made any rating changes around the quarter, and NA, TD and EQB remain our Outperformer-rated names.”
His changes include:
* Bank of Montreal (BMO-T, “neutral”) to $120 from $116. The average on the Street is $120.20.
* Bank of Nova Scotia (BNS-T, “neutral”) to $78 from $68. Average: $69.54.
* EQB Inc. (EQB-T, “outperformer”) to $113 from $105. Average: $105.56.
* National Bank of Canada (NA-T, “outperformer”) to $135 (Street high) from $134. Average: $125.54.
* Royal Bank of Canada (RY-T, “neutral”) to $167 from $166. Average: $162.70.
* Toronto-Dominion Bank (TD-T, “outperformer”) to $100 from $88. Average: $86.97.
“Getting the sector call right in 2024 has been less important than getting the bank-specific calls right,” said Mr. Holden. “The group has performed in line with the TSX Composite year-to-date, but the top three have returned 24 per cent while the bottom three have returned negative 4 per cent. Mean reversion trades are not our favourite process for stock selection. However, given the magnitude of divergence, this could be a point in time where certain mean reversion trades make sense. We think the stock most likely to re-rate higher over the next 12 months is TD. We see further updates on AML [Anti-Money Laundering] and management changes as the key potential catalysts.”
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While acknowledging its “strong” share price performance thus far in 2024 after a jump over 160 per cent versus a gain of 23 per cent for the S&P/TSX Global Gold Index, National Bank Financial analyst Mike Parkin sees the potential for “significant further upside” for Perpetua Resources Corp. (PPTA-T, PPTA-Q), pointing to recent U.S. supply constraint developments of antimony, a critical mineral contained in its Stibnite open-pit gold mine in Idaho, as well as de-risking of the project from a financing basis.
He initiated coverage of the Boise-based company with an “outperform” rating following Thursday’s announcement that it has received authorization from the U.S. Forest Service for Stibnite, which is currently the only U.S. source of antimony that is set to face a export restrictions by China. TSX-listed shares of Perpetua surged 11.5 per cent on the news.
“We believe Stibnite’s contained antimony supports a path towards the project becoming fully-permitted in the near term, something that has been a long-term overhang,” said Mr. Parkin. “Perpetua is trading at an EV/GEO (total resource) below what we believe are relevant peers on both a takeout potential basis and a development company basis, supporting further upside potential in the share price.
“Perpetua is expected to make a construction decision on Stibnite in mid-2025 after announcing completion of the final EIS on September 5, with a final Record of Decision (ROD) from the U.S. Forest Service expected by YE24 as well as numerous ancillary permits in early 2025. Given the numerous positive factors tied to this quality project, we believe there is good potential for a further re-rating higher on an EV/GEO basis for Perpetua’s shares, which is the core basis of our OP rating. As the project continues to de-risk, we believe the potential of Perpetua becoming a takeout target rises if the EV/GEO valuation does not re-rate higher.”
Despite 100-per-cent-owned Stibnite being its only asset, the analyst thinks Perpetua is separated from other gold development by the presence of antimony “due to the metal’s classification as a critical mineral by the U.S. government, with its strategic uses in both national defense and the clean energy transition.”
“Currently, the U.S. has no domestic mined production of antimony,” he said. “With the Chinese export restriction (announced August 2024) on antimony, we expect Perpetua to receive strong support from the U.S. Government to advance the country’s only large-scale antimony project towards construction readiness, as demonstrated by the completed final EIS and draft ROD authorizing Stibnite to be published on September 6.”
“Our Speculative risk qualifier is based on the company’s need to undertake significant financial leverage to fund the construction of Stibnite, which we estimate will cost US$1.9-billion. This risk is slightly muted as we expect the majority of funding to come from EXIM at a relatively attractive financing rate. Additionally, we assume US$125-million equity offering and US$250-million bond offering in 2028 to maintain minimum working capital levels. Once in production, we see Stibnite generating significant FCF in the first four years, bringing the company into a net cash position by 2034.”
Mr. Parkin set a target of $19 per share. The current average is $12.48.
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After North West Company Inc. (NWC-T) reported “solid” second-quarter results, TD Securities analyst Michael Van Aelst sees “early signs of major economic stimulus” in the Canadian north.
“Few retailers are generating 6.8-per-cent SSSG [same-store sales growth] in Canada like NWC, as it benefits from increasing consumer demand in northern communities and strong in-stock positions,” he said. “We argue that tailwinds from support payments are still in the very early innings. Direct payments to individuals under the Water Settlement are still just trickling in (enough to keep general merchandise SSS growing off tough comps) but we see these ramping up by year-end and continuing into H1/25, before giving way to the substantially larger payments to individuals from Child Welfare Reform (CWR) by early 2026 (possibly H2/25). Visibility on program spending and timing is limited but some initial funding under Jordan’s Principle (a subsegment of CWR) started to flow in certain communities this quarter, providing residents with greater access to nutritious meals by way of vouchers redeemable in store. While it helped lift Canada Food SSS by 7.6 per cent, it appears to be just the tip of the iceberg. Given this lack of visibility, however, we are trying to keep our forecasts conservative at this time.”
Shares of the Winnipeg-based retailer jumped 7.2 per cent on Thursday after it reported earnings per share of 73 cents, exceeding Mr. Van Aelst’s estimate by 2 per cent on 6-per-cent EBITDA growth.
“Following two years of declines, EBITDA (excluding SBC) returned to growth in 2023, and we are calling for another 8-per-cent/9-per-cent/11-per-cent growth in 2024/2025/2026, as NWC fully passes through COGS inflation, payments from settlements materialize, and the company extracts operational efficiencies, reduces shrink, improves its customer offerings, and leverages analytical capabilities.”
After raising his full-year 2024 and 2025 expectations, the analyst increased his target for North West shares to $59 from $52, keeping a “buy” rating. The average is $54.
“North West holds leading positions in remote regions that are difficult to serve, aided by its unique and extensive internal distribution capabilities via land, water, and sky,” said Mr. Van Aelst. “The company boasts a clean balance sheet (1.1 times ND/EBITDA) and a very attractive growth outlook, in our view. Despite Northern Canada’s much more favourable economic outlook (relative to retailers in major markets), NWC shares (at 15.3 times NTM [next 12-month] consensus EPS) are only trading in line with its 10-year average. Q2/24 SSS has added momentum to NWC’s share price, but we still see upside to at least our conservative $59 target as earnings growth accelerates from H2/24 through 2026 as substantial settlement payments are received and spent by northern residents and communities. Investors should, however, expect the lack of visibility into timing of payments/spending to result in uneven results at times along the way.”
Elsewhere, other changes include:
* BMO’s Stephen MacLeod to $56 from $44 with a “market perform” rating.
“NWC shares have re-rated quickly from the lows on the back of settlement payment & community-support spending programs that are expected to support consumer demand. While timing of payments could be lumpy, we believe the outlook is onbalance positive, supported by H2/24E / H1/25E Water Settlement payments, FNCFS settlement payments (late 2025E/2026E), and long-term reform of FNCFS and Jordan’s Principle community-support spending (disbursed over 10 years). With the stock now trading above its historical average, we remain Market Perform,” said Mr. MacLeod.
* RBC Dominion Securities’ Tom Callaghan to $47 from $40 with a “sector perform” rating.
“The North West Company delivered strong Q2 results which reflected better than forecast SSS in Canada,” said Mr. Callaghan. “Thematically, settlement payments in Canada have started to trickle-in, and although we remain somewhat cautious on timing/ capture in the near-term, these disbursements will undoubtedly add some sizzle to the story on a medium-to-longer term timeframe.”
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In other analyst actions:
* Raymond James’ Farooq Hamed moved his Calibre Mining Corp. (CXB-T) target to $3 from $2.50 with an “outperform” rating. The average is $2.96.
“We visited CXB’s Valentine gold project in Newfoundland, Canada and observed that development is well progressed across the major project components making a 2Q25 start up achievable. Beyond gaining comfort that the project should meet its start up timeline, we came away with the view that phase one of the project could ramp above the stated capacity in the LOM plan with the potential for a larger expansion in phase two.
* In response to its deal to be acquired by First Majestic Silver Corp. (FR-T) in a transaction valued at US$970-million, CIBC’s Cosmos Chiu cut his Gatos Silver Inc. (GATO-N, GATO-T) target to US$15 from US$18 with an “outperformer” rating. The average is $13.50.
“The offer represents a 16-per-cent premium based on closing prices prior to the announcement, as well as the 20-day volume weighted average prices (VWAP),” said Mr. Chiu. “Pro forma, Gatos shareholders will own approximately 38 per cent of the combined company on a fully diluted basis. Cerro Las Gatos (CLG) is an attractive asset that has generated significant free cash flow in the past year and the mine is on track to achieve the upper end of its guided 13.5-15-million silver-equivalent ounces production at all-in sustaining costs (AISC) of $14-$16/oz for 2024 (on a 100-per-cent basis). At this time, we lower our price target from $18 to $15 to reflect the current offer on the table, while incorporating some probability of an interloper given the attractiveness of the asset. Our price target is also in part calculated at a silver price assumption of $34.50/oz in 2025.”
* TD Securities’ Steven Green trimmed his Major Drilling Group International Inc. (MDI-T) target by $1 to $13 with a “buy” rating. The average is $13.75.
“While Q1 was largely in line with our expectations, near-term guidance that revenues were expected to decline in Q2 was a surprise (particularly since Q2 is typically MDI’s strongest quarter),” he said. “That being said, we believe the 12-per-cent share price decline was an over-reaction. MDI continues to grow its footprint and appears well positioned for a commodity price rebound in a declining rate environment.”
* Scotia’s Eric Winmill raised his Torex Gold Resources Inc. (TXG-T) target to $29 from $27 with a “sector outperform” rating. The average is $30.55.
“Torex Gold hosted an Investor Day and with this note we present key highlights: (1) The $950-million Media Luna Au-Cu project is nearing completion for startup early next year, (2) The company is poised for a free cash flow (FCF) inflection in 2025 as we forecast nearly $300-million in spot FCF (yield of 14 per cent), (3) The balance sheet remains strong to complete Media Luna, and as a result we expect a capital return program could be initiated next year, (4) Exploration is planned to accelerate as Media Luna capex falls off, and (5) M&A remains a potential avenue for future growth,” he said. “Further, following the recent update on EPO, we have revised our production estimates higher post 2027 and now see TXG producing over 450koz Aueq through 2030.”
“At spot gold, TXG shares are trading at a P/NAV5-per-cent of 0.61 times and 5.2 times 2025 P/CF vs. intermediate peers at 0.63 times and 5.2 times, respectively; we see further potential upside for TXG shares, with a premium valuation warranted given the company’s strong operating track record and forecast FCF growth.”
* Raymond James’ Michael Glen bumped his 5N Plus Inc. (VNP-T) target to $8.50 from $7.50 with an “outperform” rating. The average is $7.94.
“We had an opportunity to sit down in-person [Wednesday] with Gervais Jacques, President and CEO and Richard Perron, CFO for a general business update,” he said. “Focal points for the discussion included First Solar (FSLR), AZUR/RayGen, Medical Imaging, Bismuth (yes Bismuth), current EBITDA guidance, and the outlook for M&A. We would characterize the tone of the meeting as exceptionally constructive, and we expect the business to continue posting very strong results through 2H24 and 2025. With that, we are increasing our price target ... as we assess commentary surrounding the company’s Performance Materials segment.”