Inside the Market’s roundup of some of today’s key analyst actions
MATR Corp.’s (MATR-T) successful execution of its business has become increasingly reflected in its stock price, said RBC analyst Keith Mackey, who downgraded the stock to “sector perform” from “outperform.”
However, he increased his price target on the global materials technology company formerly known as Shawcor to C$22 from C$16. The stock closed Friday at C$19.54.
“Mattr shares have increased 42% YTD on an attractive mix of operational execution, exposure to an offshore up-cycle, and accretive share repurchases. We continue to believe Mattr’s growth strategy should drive future value, but believe much of the near-term growth visibility has been baked into the current share price,” the analyst said in a note to clients.
The average analyst price target is C$20.89, according to Refinitiv Eikon data.
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Things “could get a little darker before the dawn” for Canadian office real estate, said Raymond James analyst Brad Sturges following a review of the sector and CB Richard Ellis’ vacancy data release last week.
As part of Mr. Sturges’ review, he trimmed his price target on True North Commercial REIT (TNT-UN-T) to C$3 from C$3.25. He said this reflected using a lower price to adjusted funds from operations multiple for 2023 following True North’s unit price decline over the past few months and after adjusting for its monthly distribution rate in March. He has a “market perform” rating on True North. The average analyst price target on True North is C$3.10.
“We expect Canadian office sector fundamentals to further soften in the next two to three quarters, driven by new supply deliveries expected by year-end and due to further office space rationalization decisions made by certain office users,” Mr. Sturges said. As a result, he expects near-term net operating income and adjusted funds from operations growth of office REITS “to remain generally muted.”
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Several analysts raised their price targets on Dri Healthcare Trust (DHT-UN-T) following the company’s announcement Friday afternoon that it has agreed to acquire another royalty interest in Vonjo for US$66-million. The deal covers worldwide net sales for Vonjo, an oral inhibitor currently marketed by Swedish Orphan Biovitrum AB for the treatment of myelofibrosis, a bone marrow cancer.
Vonjo was approved by the U.S. Food and Drug Administration in February 2022 and is the only approved treatment for the condition. The seller is S*Bio Pte Ltd, a Singapore-based biotech firm and the original discoverer of the drug.
The price target changes were made as analysts added the new Vonjo acquisition to their financial forecasts for the company.
Canaccord Genuity raised its price target to C$18.5 from C$17.5; CIBC raised its target price to C$21 from C$18.5; and RBC raised its target price to C$18 from C$17.
The average analyst price target is now C$17.24.
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Raymond James analyst Steve Hansen is urging investors to use caution ahead of Canadian National Railway Co.’s (CNR-T) second-quarter results on July 25.
“While we continue to admire CN’s long-term outlook, we reiterate our neutral rating based upon sustained macroeconomic concerns, pronounced traffic headwinds, and the firm’s lofty valuation (vs. history),” Mr. Hansen said in a note to clients Monday.
“Make no mistake, CN is coming off a difficult 2Q period marred by record Canadian wildfires (west & east), acute spring flooding (Western Canada), and falling traffic (RTMs [Revenue Ton Miles]: -7.3% y/y). At the same time, management’s decision to carry an elevated workforce through the traffic draw-down will likely only serve to amplify negative operating leverage,” he said.
“In short, CN has been running hard to move less—a pattern we expect to be visible in the upcoming 2Q23 print. Finally, while we’d like to suggest the worst is behind us, we still believe the 2H23 traffic outlook remains murky, and in desperate need of a grain backfill (that might not come).”
He reiterated a “market perform” rating and C$190 price target. The average analyst price target is much lower, at $165.93.
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RBC analyst Keith Mackey upgraded Patterson-UTI Energy Inc. (PTEN-Q) to “outperform” from “sector perform” in light of two recent acquisitions in the energy services space: NexTier and Ulterra.
“The rationale for our upgrade includes: 1) Enhanced free cash flow metrics partially aided by synergy capture, 2) Increasing operational scale and international diversification 3) Increased market capitalization should ultimately move PTEN onto the radar screens of a wider group of investors. We increase our 2023/24 EBITDA estimates by 4/7%,” Mr. Mackey said in a note to clients.
He maintained a US$19 price target. The average analyst price target is US$16.65.
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RBC’s Mr. Mackey downgraded Helmerich & Payne Inc. (HP-N) to “sector perform” from “outperform” citing the bank becoming more conservative in its forecasts for the number of rig counts that will be deployed in the industry.
His price target was cut to US$45 from US$53. The average analyst target is US$45.75.
“We believe HP is a high-quality land driller with a solid balance sheet and high proportion of super spec rigs in its fleet. However, we see fewer growth and margin expansion catalysts for the stock given our revised outlook for flatter US rig count trajectory,” the analyst said in a note.
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Morgan Stanley analyst Ben Swinburne raised his target price on Netflix Inc (NFLX-Q) to US$450 from US$350, citing a combination of continued strong execution, withdrawals from competitors, and disciplined expense trends.
But with the stock closing Friday at US$437.65, he suggests waiting for a better entry point.
“On a 12-month view, there may be more risk of multiple compression from here than multiple expansion,,” Morgan Stanley said in a summary of Mr. Swinburne’s note.
Still, “Netflix is poised to demonstrate how good a business streaming can be at scale,” the analyst believes.
The average analyst price target is US$403.09.
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In other analyst actions:
Bluestone Resources (BSR-X): Haywood Securities cuts to “hold” from “buy” and cuts target price to C$0.75 from C$2.85
Russel Metals Inc (RUS-T): National Bank of Canada initiates with “sector perform” rating with price target C$41
Fox Corp (FOXA-Q): Wells Fargo cuts target price to US$31 from US$35 and cuts rating to underweight from equal weight
Williams-Sonoma, Inc. (WSM-N): Barclays cuts target price to US$115 from US$126 and downgrades rating to “underweight” from “equal-weight”
Boise Cascade Co (BCC-N): BofA Global Research raises to “neutral” from “underperform” and raises price objective to US$103 from US$65
First Solar Inc (FSLR-Q): BMO initiates coverage with “market perform” rating and price target of US$204. Also, Guggenheim raises target price to US$334 from US$277
International Paper Co (IP-N): BofA Global Research cuts to “underperform” from “neutral” and reduces price objective to US$33 from US$35
Weyerhaeuser Co (WY-N): BofA Global Research raises to “buy” from “neutral” and raises price objective to US$38 from US$34