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Inside the Market’s roundup of some of today’s key analyst actions

Wells Fargo analyst Jeff Cantwell has “weakening confidence” in Shopify Inc.’s (SHOP-N; SHOP-T) upcoming second-quarter results after examining metrics for the company’s website.

He now expects a more sluggish recovery for the company than previously estimated, and lowered his price target to US$40 from US$55. Separately, Piper Sandler also cut its target price on Shopify to US$38 from $60. The average analyst price target is US$55.12, which is down nearly $4 from a month ago, according to the latest data from Refinitiv Eikon.

“June data shows Y/Y declines in both visits (-14%) and unique visitors (-5%) to SHOP’s login page,” Mr. Cantwell said in a note to clients. “2Q data overall shows declines both Y/Y and Q/Q; on that basis, we’re growing more downbeat on SHOP’s 2Q gross merchandise value/revenue heading into its print on July 27.”

He also expects the weakening macroeconomic picture to weigh on Shopify’s results going forward, and lowered his 2023 financial estimates for the company.

“SHOP is seeing progressively lower numbers of unique visitors to its login page when we’re analyzing 4Q/1Q/2Q vs. the same quarter in the prior year—and then this year, 1Q and 2Q data are both showing progressively lower unique visitors on a sequential basis. This stands out to us, as the historical data shows unique visitors improved sequentially in 2Q vs. 1Q back in 2019. This all leads us to believe it’s likely SHOP’s volumes aren’t quite growing as quickly as one might’ve thought at this point in time, probably due to the ongoing shift away from e-com by consumers post-pandemic,” Mr. Cantwell said.

“We’re cautious on SHOP heading into 2Q earnings given the data, and that we also expect a fairly muted rebound in e-com more broadly from here. Recall during 1Q earnings SHOP indicated record inflation and gas prices were impacting consumers’ discretionary spending capacity; concurrently, the timing around Omicron easing drove a shift towards offline retail around February this year, which impacted 2Q,” he added.


Raymond James analyst Frederic Bastien downgraded IBI Group Inc. (IBG-T) to “market perform” from “outperform” after the company Monday agreed to sell itself to European design and engineering consultancy Arcadis.

“Since we see no serious strategic or financial buyer stepping up with a higher bid, we set our new target price at $19.50, Arcadis’ offer price, and encourage shareholders to tender their IBG shares,” he said in a note.

Amsterdam-based Arcadis is proposing to acquire IBI for an aggregate consideration of $873 million, which represents 11.5x the analysts’ average EBITDA estimate for 2022

“To the extent we have long applied a target forward EV/EBITDA multiple of 10.0x to derive our IBI valuation, the takeout value reconciles with our own risk-reward assessment of the company. The all-cash $19.50 per share offer also implies premiums of 30% to IBI’s Friday close,” Mr. Bastien said. “We see this as appropriate when balancing the significant growth opportunities highlighted in the firm’s 5-year Strategic Plan with the strain that a possible recession could pose on the economy,” he added.

The analyst said he is treating the transaction as a done deal. “That’s because the IBI Group Management Partnership holds a lot of sway over the firm’s direction. Together with its affiliates, the group controls approximately 33% of all eligible shares, and entered into a voting support agreement in favour of the deal. A Special Meeting to consider the transaction is scheduled for September. Assuming it receives shareholder approval as expected, and does not run into any regulatory pushback, we expect the deal to close shortly thereafter,” he said in a note to clients late on Monday.


BMO Capital Markets analyst Étienne Ricard initiated coverage on MCAN Mortgage Corp. (MKP-T) with a “market perform” rating and a price target of C$18.

MCAN generates income by investing in a portfolio of mortgages that includes single family residential and non-residential construction units, and the company also makes commercial loans.

“MCAN’s stock offers a sustainable 9% dividend yield and long-term low to mid-teens annual return on investment potential. However, we are mindful macro-economic headwinds brought about by rising interest rates could weigh on mortgage spread and growth prospects,” Mr. Ricard said in a note.

“We view the risk-reward as balanced and would monitor for a better valuation entry point, all else equal,” he concluded.


RBC analyst Jimmy Shan initiated coverage on Nexus Industrial REIT (NXR-U-T) with a “sector perform” rating and C$12.25 price target.

The real estate investment trust provides investors with a Western Canada and secondary market play on the industrial sector. While the analyst likes the company, he believes the economic picture poses a challenge.

“We view NXR as a promising, emerging small cap industrial REIT led by a veteran CEO, that has successfully pivoted to the industrial segment by acquiring assets on an attractive cost basis,” Mr. Shan said in a note to clients. “Our rating reflects a lower relative return profile to its Canadian industrial peers and a macro environment in which investors are more likely to tilt to a major market focus.”

The average analyst price target is C$14.38.


RBC analyst Paul C. Quinn made several rating and price target adjustments to the paper, packaging and forest products stocks that he covers. Here are some highlights:

Canfor Pulp Products Inc (CFX-T): RBC raises target price to C$8 from C$6 and upgrades rating to “outperform” from “sector perform”

“We expect significantly higher pulp pricing to accelerate Canfor Pulp’s cashflow in the second half of 2022 after the company struggled in first half 2022 with production, transportation and logistical issues. As such, we see upside in the share price from current levels.”

Cascades Inc (CAS-T): RBC cuts target price to C$11 from C$15 and downgrades rating to “sector perform” from “outperform”

“While the unfortunate double earnings revisions of Q421 are behind the company, a slowing economy poses risks to the company’s ramp-up of Bear Island at the end of the year. In addition, recovered paper and pulp prices are expected to stay high for longer.”

Conifex Timber Inc (CFF-T): RBC cuts target price C$2 from C$2.50 and downgrades rating to “sector perform” from “outperform”

“We think higher interest rates, lower housing activity and lumber capacity additions are likely to keep lumber prices range bound, with a ramp-up of 2.6 Bfbm of new sawmill capacity in 2022 likely to mute any price recovery in H222. As such, we see better opportunity elsewhere in our coverage.”

Doman Building Materials Group Ltd (DBM-T): RBC cuts target price to C$7 from C$10 and downgrades rating to “sector perform” from “outperform”

“Although Doman should be well positioned to benefit from any future increases in construction activity, we think rapidly rising interest rates are likely to slow the North American housing market in the near term. As such, we see better near-term opportunities elsewhere in our coverage.”

Greenfirst Forest Products Inc (GFP-T): RBC cuts target price C$2 from C$3 and downgrades rating to “sector perform” from “outperform”

“We think rising interest rates, a slowing North American housing sector, and lumber capacity additions will likely keep lumber prices muted and range bound, and as such, we see better opportunities elsewhere in our coverage in the near term.”


Citi thinks the selloff in Delta Air Lines Inc. (DAL-N) following its quarterly financials last week was overdone. The bank is reiterating its “buy” rating and has opened a “90-day positive catalyst watch” on the shares.

“The negative stock price reaction to Delta’s 2Q print seemed to go a little too far,” Citi analyst Stephen Trent said in a note.

“Although the quarter featured a miss vs. recent EBIT margin guide, adjusted EPS came in at $1.44 and Delta still generated $1.6B of free cash flow over the quarter. In spite of these achievements, the stock has gotten knocked back down to the ca. $30/share range - in-line with mid-2020 levels when daily cash burn was in the millions and there were no COVID-19 vaccines in sight,” he said.

His price target remains US$57. The average analyst target is US$48.40.


Goldman Sachs upgraded Yum! Brands (YUM-N) two notches to “buy” from “sell” with a price target of US$135.

The bank said the company’s highly franchised restaurant model provides relative insulation from macro-economic volatility. The bank also did a market-by-market analysis that showed it can drive unit growth growth over the next two years ahead of its long-term targets.

“While YUM shares have outperformed our coverage YTD (-15% vs restaurants -25%, franchised fast food -21%), we still see valuation support from relative valuation vs MacDonald’s and free cash flow/dividend yield vs peers, and view the model as defensive in a slowing macro backdrop. Further, we see upside tailwinds from China re-opening trends, and while trends in the market are likely to remain volatile, the franchise structure means choppy re-opening trends present lower risk to YUM’s overall earnings profile,” said Goldman analyst Jared Garber.

YUM’s brands include KFC, Pizza Hut, and Taco Bell.


In other analyst actions:

Osisko Gold Royalties Ltd (OR-T): BMO raises target price to C$22 from C$17

Russel Metals Inc (RUS-T): RBC cuts target price to C$39 from C$45

Teck Resources Ltd (TECK-B-T): BMO cuts target price to C$55 from C$61

Caterpillar Inc (CAT-N): Credit Suisse cuts target price to US$226 from $262

Deere & Co (DE-N): Credit Suisse cuts target price to US$393 from $472

Domino’s Pizza Inc (DPZ-N): Stifel raises target price to US$400 from $345

JP Morgan (JPM-N): Berenberg raises to hold from sell; RBC cuts target price to US$130 from $155

Merck & Co Inc (MRK-N): UBS raises target price to US$98 from $76. BMO cuts target price to US$91 from $92

Snap Inc (SNAP-N): Credit Suisse cuts target price to US$45 from $59

Aeva Technologies Inc (AEVA-N): Piper Sandler cuts to neutral from overweight and cuts target price to US$3 from $5

Rayonier Advanced Materials (RYAM-N): RBC cuts target price US$5 from $6 and raises rating to outperform from sector perform

General Electric (GE-N): Cowen and Company cuts price target to US$84 from $110

General Motors Co (GM-N): Deutsche Bank cuts to hold from buy and cuts target price to US$36 from $57

With files from Reuters

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