Inside the Market’s roundup of some of today’s key analyst actions
CIBC analyst Kevin Chiang downgraded transit bus manufacturer NFI Group Inc. (NFI-T) to “neutral” from “outperformer” citing recent share price outperformance against peers and a lack of near-term catalysts to ignite a further rally.
He maintained a C$34 price target.
Mr. Chiang said he remains concerned about supply chain disruptions impacting near-term visibility, which adds another element of uncertainty as NFI’s earnings recover from the depths of the pandemic.
In the longer run, Mr. Chiang still sees NFI as a stock worth holding. “We maintain a positive long-term outlook on NFI given the healthy funding environment for public transit agencies, especially as we continue to see strong support for the transition towards ZEBs (zero-emission buses),” he told clients in a note “We view NFI as well-positioned to leverage this tailwind given its leading market share in its key end markets (U.S., Canada, U.K.).”
The average price target among analysts is $33.81, according to Refinitiv Eikon data.
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Raymond James analyst Steve Hansen upgraded Enwave Corp. (ENW-X) to “outperform” from “market perform” following “standout” fiscal third quarter 2021 results.
Adjusted EBITDA “pushed back firmly into positive territory and offered clear evidence of the firm’s accelerating turnaround in both divisions,” Mr. Hansen commented in a note.
EnWave licenses, builds, and installs commercial-scale dehydration platforms for applications in the food, and cannabis and pharmaceutical sectors. Separately, the company manufactures and sells a dried cheese snack called Moon Cheese through its wholly-owned subsidiary NutraDried.
EnWave’s fiscal third quarter revenues of $7.4 million was up 22.6% from a year ago and beat the Street estimate of $6.1 million. The company also reported impressive sales and margins figures.
“Looking forward, management remains demonstrably constructive over its sales pipeline, drawing confidence from several factors including: 1) the firm’s new strategic partnership with Dole Worldwide Foods & Beverages, one aimed at developing innovative new fruit & veggie snack lines (acquired one 10 kW machine to start, with room for significant upside); 2) strong/accelerating interest from the US cannabis industry, largely thanks to the robust/quantifiable benefits associated with ENW’s TerpeneMax drying technology,” Mr. Hansen said.
He raised his price target to C$1.65 from C$1.45. The average price target among analysts is C$1.53.
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Several analysts raised their price targets on Canadian Western Bank (CWB-T) following a well-received quarterly earnings, believing the stock is a buy given its more attractive valuations versus the Big Bank stocks.
“Strong FQ3 results support our Outperformer thesis, which is primarily premised on loan growth and NIM (net interest income) upside,” commented CIBC analyst Paul Holden in a note. “We expect CWB will continue to deliver strong top-line growth in F2022.” He raised his price target to C$44 from C$42.
He raised his fiscal 2021 and 2022 EPS forecasts by 3%. “The major assumption changes are higher net interest income (NII), higher fee income and higher operating expenses as a partial offset. Management increased its EPS growth guidance for F2021 to greater than 20% and our revised estimate implies growth of 25%,” Mr. Holden commented.
CWB is trading at 9.1x price to earnings based on 2022 estimates, below its five-year average of 10.3x and an average of 10.8x for the Big 6, the analyst noted.
Elsewhere, BMO raised its price target to C$42 from C$41; Cormark Securities raised its target price to C$42 from C$41; National Bank of Canada raised its target to C$41 from C$40; and RBC raised its target price to C$39 from C$38.
Scotiabank analyst Meny Grauma raised his price target by $1 to $43 and reaffirmed a “sector outperform” rating.
“Canadian Western Bank remains an attractive post-pandemic recovery play given that the shares continue to trade at a wide discount to the peer group even as company fundamentals (especially loan growth) keep improving. These improving fundamentals were also a key feature of the bank’s Q2 results, but the stock market reaction to that release was weighed down by the firm’s plans to establish a $150MM at-the-market (ATM) equity offering. Although the ATM is clearly driving some dilution in the short run, the reality is that with spot loans growing at 9% Y/Y, CWB absolutely requires additional equity in order to fuel its rapidly accelerating organic growth,” Mr Grauma said in a note to clients.
The average target among analysts is now $41.42.
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RBC analyst Matt Logan believes this is an opportune time for investors to buy units in H&R REIT (HR-UN-T).
H&R is a diversified REIT, and according to Mr. Logan’s calculations, has about 33% exposure to the retail sector, 28% to apartments, 28% to offices, and 10% to the industrial sector.
Overall, Mr. Logan thinks about 20–25% of H&R’s portfolio is facing acute headwinds because of the impact COVID-19 has had on the real estate sector, and he most concerned about the negative impact on the REIT’s lower-quality enclosed malls and Class B office.
But, “with 50–66% of H&R’s retail comprised of higher quality malls, grocery/necessity-oriented retail, and newly constructed retail space, we are generally comfortable with most of the portfolio. While we acknowledge that WFH trends will (eventually) impact all of H&R’s office space, we think long-term leases and redevelopment opportunities provides some protection for 64% of the portfolio,” he said in a note to clients.
He raised his price target by $1 to $19 and maintained a “sector perform” rating.
“Following a deep dive into H&R REIT’s highly diversified portfolio, we come away with: 1) increased conviction in a potential upside scenario; and, 2) more comfort that H&R can weather on-going headwinds in its retail and office portfolios. With H&R’s units trading at what we see as an unduly punitive 27% discount to NAV, we see limited downside, reasonable return prospects, and a potentially meaningful $21–22 upside scenario if H&R can execute on a potential Lantower Residential spin-out,” he said.
The average price target among analysts is $18.71.
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Several analysts Monday initiated coverage on barbecue maker Weber Inc. (WEBR-N) following its recent IPO. While most were enthusiastic on the stock and its brand power, some were concerned that the run-up in the share price has already reflected a lot of positives.
BMO started coverage with a “market perform” rating and price target of US$19; Citigroup initiated with a “neutral” rating and US$18 target price; Goldman Sachs initiated with a “buy” rating; JP Morgan started with an “overweight” and price target of $19.50; KeyBanc initiated with a “sector weight” rating; and Well Fargo started with an “equal weight” rating and price target of $17.
“We see it as a solid growth story tied to the investing in the home theme with high brand awareness and global scale,” commented Goldman Sachs.
But Citigroup, in a note to clients, explained why its cautious on the stock in the nearer term.
“WEBR is the global leader in outdoor cooking, holding a global market share of 24%, which is about three times the size of its next closest competitor. .... We see a long runway with lots of whitespace for growth. Indeed, we expect that as the company brings innovation to market, continues to develop its digital channels, and expands into nascent international grilling markets, WEBR’s sales growth over the longer-term .... We also see many opportunities for WEBR to improve profit margins over time and believe it has the right tools in its toolbox to do so. Despite this favorable long-term outlook and a relatively undemanding valuation, we are much less certain about what the short-term holds, particularly as WEBR faces tough compares and as we are in the midst of a very tough inflationary commodity environment,” Citigroup said.
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In other analyst actions:
Canaccord Genuity downgraded Pivotree Inc. (PVT-X) to “hold” from “buy” and cut its price target to C$6 from C$9. Pivotree Inc is a global commerce services provider supporting clients from strategy, platform selection, deployment, and hosting through to ongoing support:. The analyst cited customer churn as a concern and its ability to sustain reoccurring revenues. .
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Darcy Keith