A survey of North American equities heading in both directions
On the rise
Calibre Mining Corp. (CXB-T), Aya Gold and Silver Inc. (AYA-T), CES Energy Solutions Corp. (CEU-T) and bus-making company NFI Group Inc. (NFI-T) all rose following the late Friday announcement from S&P Dow Jones Indices that they will be added to the S&P/TSX Composite Index, the broadest measure of the Canadian market.
No stocks will be deleted from the composite and no changes are being made to the S&P/TSX 60, a selection of most of the largest companies in the composite.
Mississauga-based Cargojet Inc. (CJT-T) was up over 4 per cent after saying it has signed a three-year agreement with Chinese company Great Vision HK Express to provide scheduled charter flights between Vancouver and China.
The company says it will fly a B767-300F aircraft on a route connecting Hangzhou, China, and Vancouver.
Under the agreement, Cargojet will operate a minimum of three flights per week.
Cargojet says total revenue for the program is estimated to top $160 million for the full term of the agreement.
Service began on May 22.
Cargojet provides air cargo services to cities across North America with a fleet of 41 aircraft.
Nvidia (NVDA-Q) turned higher in afternoon trading and finished up 0.8 per cent as its 10-for-1 stock split aimed at luring retail investors took effect, sparking speculation over chances of the artificial intelligence bellwether’s inclusion in the blue-chip Dow index.
The split, aimed at lowering per-share value to make it more affordable for employees and investors, increases the company’s outstanding shares without changing the stock’s valuation.
“A side-effect of Nvidia’s stock split will be to put it in the running to follow Amazon and Apple into the Dow, potentially pushing out fellow chip stock Intel that currently has the lowest weighting,” said Ben Laidler, global markets strategist at digital brokerage eToro.
The stock has climbed nearly 27 per cent since the company announced the share split and a strong forecast last month. The dominant AI chip maker had also clinched US$3-trillion in market value and surpassed Apple (AAPL-Q) to become the second-most valuable firm in the world, trailing only Microsoft (MSFT-Q).
Shares of CrowdStrike (CRWD-Q), KKR & Co (KKR-N) and GoDaddy (GDDY-N) rose after S&P Dow Jones Indices said the companies would be included in the S&P 500 as of June 24, replacing Robert Half (RHI-N), Comerica (CMA-N) and Illumina (ILMN-Q).
Southwest Airlines’ (LUV-N) shares soared over 7 per cent after activist investor Elliott Investment Management reported an about US$1.9-billion stake in the U.S. carrier.
“Southwest’s poor execution and leadership’s stubborn unwillingness to evolve the Company’s strategy have led to deeply disappointing results for shareholders, employees and customers alike,” Elliott said in a statement.
Southwest, one of the largest U.S. airlines, has been grappling with higher costs and slower-than-expected revenue growth due to delays in 737 MAX aircraft deliveries from planemaker Boeing.
The carrier has said delivery delays have led to “significant challenges,” leaving it overstaffed and forcing it to temper its growth plans.
The Dallas-Texas-based company’s shares have fallen nearly 4 per cent this year, compared with an about 12-per-cent rise in the S&P 500 index.
“We are not surprised by the activist interest in Southwest given the very strong franchise with valuable tangible and intangible assets,” Raymond James analyst Savanthi Syth wrote in a note.
Elliott is known for pushing for changes in companies to boost shareholder returns.
Southwest, however, is not alone in struggling with Boeing delays. Rival United Airlines (UAL-Q) also took a US$200-million hit in the first quarter from the disruptions at Boeing.
Despite these challenges, the airline sector expects to do well over strong demand for summer travel.
Southwest shares trade about 19.52 times their forward profit estimates, compared with United’s 4.74 and above the industry multiple of 7.19.
Vista Outdoor (VSTO-N) increased after it said on Monday it had rejected a sweetened takeover bid for the company by Montreal-based investment firm MNC Capital, and that it had received a more than US$2-billion offer from a private investment firm for its sporting products unit.
MNC Capital raised its offer for the sports and outdoor products maker to US$39.50 per share, or more than US$3-billion, last week after its offer of US$37.50 per share was rejected by the company, saying it undervalued the company and its performance gear business, Revelyst.
In May, the company had agreed to sell the sporting products unit, Kinetic Group, to Czechoslovak Group for US$1.96-billion.
On the decline
Corus Entertainment Inc. (CJR.B-T) dropped 29.6 per cent after it announced Warner Bros Discovery has unexpectedly decided not to renew certain programming and trademarks output with Corus following the end of calendar 2024.
“The decision will likely deprive Corus of trademarks and programming on 5 channels which together accounted for close to $155-million and $49-million of revenues and Operating Income in fiscal 2022 (last published CRTC data),” said Scotia analyst Maher Yaghi, who downgraded his recommendation for its shares. “While Corus will work on backfilling the programming for those channels with other content, the loss of the trademark will likely push many subscribers currently on those channels to turn to other broadcasters/streamers who will end up landing those rights. Assuming that Corus could lose 50 per cent of the subs and advertising revenues, we believe the company’s valuation would be materially affected.”
“The channels in question are the Food Network Canada, HGTV Canada, Cooking Channel, Magnolia Network and the Oprah Winfrey Network ... It is important to point out that the loss of trademarks and content coming from Warner Bros does not mean that all revenues will be lost. Corus will look to secure additional content from other producers in order to beef up the content on these channels, however the trademark of the channels themselves (the brand name of the channels) will go to whichever company secures the rights to those trademarks. What will follow could get very messy,” he added.
Toronto-based bitcoin miner Bitfarms Ltd. (BITF-T) fell 3.6 per cent after it said on Monday it had approved the adoption of a “poison pill” to fend off a potential hostile takeover attempt by rival Riot Platforms (RIOT-Q).
The move comes days after Riot Platforms disclosed it had built a 12-per-cent stake in Bitfarms as it pursues a takeover attempt.
Riot had initially made a private proposal to buy Bitfarms in April. The proposal was rejected by Bitfarms’ board after it concluded that the offer “significantly undervalued” the company.
Colorado-based Riot went public with its proposal in May to buy the bitcoin miner for about $950 million and said it intends to request a special shareholder meeting to add independent directors to Bitfarms’ board.
Under Bitfarm’s plan, if an entity accumulates more than 15 per cent of Bitfarms’ stake after June 20 and up to Sept. 10, the company would issue fresh shares, diluting the entity’s stake.
After Sept. 10, the threshold would be relaxed to 20 per cent as long as any takeover attempt meets certain conditions.
Shareholder rights plans, known as “poison pill,” are used by corporate boards to thwart hostile takeover bids.
Bitfarms said the shareholder rights plan aimed to preserve the integrity of its previously announced strategic alternatives review process.
The bitcoin miner started conducting a strategic alternatives review last month after receiving Riot’s proposal. The review includes a possible merger or sale of the company.
The rights plan is subject to shareholder ratification within six months of its adoption, failing which it will terminate, Bitfarms said.
Roots Corp. (ROOT-T) slipped 3.6 per cent after saying it lost $8.9-million in its latest quarter as it missed out on some sales because it didn’t have enough of its fleece products to keep up with demand and is still seeing shoppers grapple with economic headwinds.
The Toronto-based apparel retailer’s first-quarter result announced Monday compared with a loss of $8.0-million a year earlier.
The loss amounted to 22 cents per share for the quarter ended May 4, compared with a loss of 19 cents per share a year earlier, while sales totalled $37.5-million for the most recent quarter, down from $41.5-million in the same quarter last year.
Meghan Roach, chief executive of Roots, attributed much of the decline to a fall in the company’s corporate retail store and e-commerce sales, which amounted to $31.4-million, down from $35.4-million a year ago.
Some of the decline may have come from consumers rethinking purchases because of high inflation and interest rates, while Roots holding lower amounts of inventory than they had in the past may also have weighed on sales.
Ms. Roach said parsing out which had a bigger impact is “difficult.”
“We did see a decline in markdown sales, so obviously the consumer discretionary spending (is) more pressured,” she said.
“If we had more inventory to put on markdown, obviously we think that could have potentially risen sales a bit more.”
Roots has spent the last few quarters paring down its markdowns, a strategy which can wean shoppers off waiting to make purchases in hopes of finding a deal later.
Supply also factored into the lower sales Roots saw in its last quarter.
“We faced some inventory challenges in our Cooper fleece category which performed very well in Q4, but left us with insufficient supply to satisfy demand,” Ms. Roach said.
The company also spent the quarter renovating two of its larger stores, including its Eaton Centre flagship location in Toronto. The space’s facade has now been refreshed with its layout revamped to better showcase its merchandise and digital screens added.
Since reopening the locations, Ms. Roach said the company has seen its performance rebounding.
Apple (AAPL-Q) was down 1.9 per cent after it unveiled a long-awaited AI strategy on Monday, integrating its new “Apple Intelligence” technology across its suite of apps including Siri and partnering with OpenAI to bring ChatGPT to its devices.
With these moves, the iPhone maker is seeking to reassure investors that it has not lost the AI battle to Microsoft , even though it may have forfeited a few rounds.
But shares of the iPhone maker were down as investors sought more AI announcements. The stock has trailed those of other Big Tech companies this year.
The AI features were announced at its Worldwide Developers Conference and will come with the latest operating system for its devices, which were also demonstrated at the event.
The features will allow users to summarize text and generate other content, such as personalized animations to wish a friend happy birthday.
Apple also said that the ChatGPT integration would be available later this year and that other AI features will follow, adding that the chatbot could be accessed for free and that users’ information will not be logged.
Apple executive Craig Federighi, introducing the ChatGPT integration, said, “We want you to be able to use these external models without having to jump between different tools.”
The company also revamped Siri with generative AI technology to give the long-lagging voice assistant the ability to control individual app features. That means Siri can now delete emails and edit pictures for iPhone users - powers that had proven tricky in the past as the assistant needs to understand the user’s exact intentions as well as how the app works.
With files from staff and wires
David Leeder