Inside the Market’s roundup of some of today’s key analyst actions
TD Cowen analyst Graham Ryding upgraded Onex Corp. (ONEX-T) to “buy” from “hold” along with a hefty increase to his price target. The moves came after the holding company reported quarterly results that were, in the words of the analyst, “good on several fronts.”
“Our more constructive view reflects: 1) solid portfolio realization activity year-to-date; 2) strong credit fundraising in 2024; and 3) an improving outlook on FRE [fee-related earnings, a non-GAAP measure],” Mr. Ryding said in a note to clients. “The potential for further portfolio realizations in 2025 if rates migrate lower should support further buyback activity and NAV/share growth.”
His price target went to C$140 from C$111.
The average analyst price target is now C$141, according to LSEG data. There are only three analysts who cover the stock.
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Canaccord Genuity analyst Yuri Lynk upgraded Stantec Inc. (STN-T) to “buy” from “hold” while raising his price target to C$135 from C$125 following the company’s third-quarter results.
Mr. Lynk said the upgrade was primarily a valuation call, but there are a lot of positives going for the consulting services company in its businesses as well.
“Stantec shares are up 5.5% YTD, underperforming peers such as AtkinsRealis (+63%), Tetra Tech (+41%), Jacobs (+35%), WSP Global (+31%), and AECOM (+20%),” the analyst said in a note to clients. “We attribute this underperformance to Stantec’s valuation getting ahead of itself late in 2023 rather than an execution issue. After all, adj. EPS is on track to increase nearly 18% this year, and management just increased its 2024 Return on Invested Capital target by 100 bps to 12%,”
“With strength in water ongoing, signs of improvement in the UK, E&R set to return to growth, and compelling acquisition upside, we believe the time is right to get more constructive on Stantec shares. On our 2025 estimates, Stantec trades at 15.4x EV/EBITDA (after rents) vs. the peers noted above at 16.1x,” Mr. Lynk added.
Among the highlights for the fourth quarter was adjusted EPS of $1.30 increasing 14% y/y and beating Canaccord’s estimate of $1.27. Management modestly revised the midpoint of 2024 net revenue growth guidance and the top and bottom end of the range for adjusted EPS growth from 12% to 16% to 16% to 18%.
Elsewhere, Desjardins Securities analyst Benoit Poirier raised his price target on Stantec to C$138 from C$124 while reiterating a bullish stance. “We are pleased with the continued momentum building in the U.S., the evolution of the M&A strategy toward larger transactions and the accretion opportunities provided by STN’s multiple expansion,” Mr. Poirier said.
The average analyst target is C$130.32.
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Analysts aren’t sounding overly pleased with the latest quarterly results from Canadian Apartment Properties REIT (CAR-UN-T), with at least five trimming their price targets.
National Bank of Canada cut its target to C$61.50 from C$63; Raymond James trimmed its target to C$58 from C$59.50; BMO cut its target by C$2 to C$54; Scotiabank cut its target price to C$53 from C$55.50; and TD Cowen cut its target price to C$58 from C$62.
Third quarter funds from operations were $0.66/unit, slightly below the consensus of $0.66, but up 3% from a year ago.
“CAPREIT is quickly advancing its transformation towards a pure-play Canadian MFR property platform,” Raymond James analyst Bad Sturges said in a note to clients. “As CAPREIT appears to be winding down its ERES investment, we expect that further Dutch MFR asset sales could come fast and furious next year once ERES’ minority unitholder approval is received in Jan-25. For now, we believe an active capital rotation program in Canada and Europe over the next 12-18 months could temporarily constrain CAPREIT’s AFFO/unit growth YoY, until cash proceeds are redeployed into targeted Canadian recently constructed MFR assets.”
BMO analyst Michael Markidis said he trimmed his target “to reflect a higher degree of uncertainty with respect to fundamentals next year.”
The average target is now C$56.53.
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ATB Capital Markets analyst Martin Toner downgraded Docebo Inc. (DCBO-T) to “sector perform” from “outperform,” citing valuation concerns. His price target remains at C$75 and other than a stock rising a little too quickly, he found a lot to like in the company’s latest earnings report.
Docebo on Friday reported Q3/24 consolidated revenue of $55.4 million (19.2+% y/y), a beat on consensus of $54.2 million. Adjusted EBITDA of $8.7 million beat consensus of $8.3 million. The company reported annual recurring revenue (ARR) of $214.1 million (+18% y/y), marking the fourth consecutive sequential deceleration, but incremental ARR was $8.2 million, the second quarter of improvement.
Management raised its annual guidance from FY24 revenue growth of 18%-19% to annual growth of 19.5%. Management noted that its pipeline quality is improving, and though small and medium-sized business customers remain cautious, management expects continued penetration into mid-market and enterprise segments.
“We continue to believe that DCBO’s current valuation undervalues long-term growth and that as enterprise spending improves, DCBO’s revenue growth will further accelerate,” Mr. Toner said.
Given the stock rose 21% over the past month, he felt the downgrade was prudent, but added: “An IT spending recovery or faster than expected revenue from the government sector are two catalysts that could be accretive to our growth forecast and would cause us to revisit our sector perform rating.”
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Constellation Software Inc. (CSU-T) has faced a M&A slowdown this year that has been driven by a lack of large deals, leading to a deceleration of growth that could now remain below the company’s historical 20-30% range through most of fiscal 2025, said TD Cowen analyst David Kwan.
But the TD analyst also expects stronger margin expansion to help mitigate the growth headwinds, and he increased his price target on Constellation to C$4,800 from C$4,500. He maintains a “hold” rating but noted the stock enjoys a lower valuation than its spinoff companies Topicus and Lumine Group.
Constellation late Friday reported quarterly revenues of $2.54 billion that were in line with expectations but below growth levels of the recent past. It also had a “solid” EBITDA beat, Mr. Kwan noted.
Looking forward the concern is whether there are enough acquisition deals to keep up the company’s high growth rate.
“Our analysis indicates CSU likely needs to close at least one large deal per year to sustain its historical 20-30% growth rate. However, as a value buyer, CSU has said finding and closing large deals has been challenging, especially for higher-quality assets that would likely require the spin-out structure. Instead, we believe future large deals would have some “hair” that could lead to near-term pressure on margins and ROIC,” the TD analyst said.
The average price target is C$4,794.44.
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Scotiabank analyst Phil Hardie downgraded Definity Financial Corp. (DFY-T) to “sector perform” from “sector outperform”, saying it’s time for investors to take profits after a stellar run in its stock price.
“We were pleased with Definity’s third quarter results that saw 3% growth in BPVS [book value per share], better-than-expected underwriting profitability, and continued double-digit top-line momentum,” Mr. Hardie said in a note to clients. “That said, with the stock up ~50% over the last year and trading at the high end of the expected range given ROE and excess capital, we see limited opportunity for further multiple expansion. Despite a robust outlook for growth in BVPS over the next twelve months, we think the near term risk-reward of owning the shares has shifted to the downside and believe now is a good time to take profits.”
Definity reported third quarter operating EPS of 13 cents, much better than the Street expectations for a 3 cents loss.
Mr. Hardie raised his price target to C$58 from C$56 despite the rating downgrade.
“We maintain a relatively positive fundamental outlook for company and would look to revisit the story at a more attractive entry point. The team is making progress on initiatives expected to help enhance its margins and structural return on equity, including (1) achieving at least break-even contribution from its digital platform, Sonnet, (2) reducing its expense rate, and (3) claims transformation. The company also has a high level of financial flexibility and a strong appetite for M&A,” the analyst said.
The average analyst price target is C$58.60.
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Canaccord Genuity analyst Matt Bottomley slashed his price target on Canopy Growth Corp. (WEED-T) by C$1 to C$2.50 while reiterating a “sell” rating as he reviewed the pot company’s fiscal second quarter results. That’s well below the average analyst price target of C$7.15.
“Overall, we view the quarter as largely muted in nature and the company’s cash flow burn (while improved year over year) remains elevated in relation to Canopy’s cash reserves and long-term debt obligations. In our view, management will need to continue to rely on its equity raises to bridge the gap, which would result in further near-term dilution (with CGC’s share count up ~19% since their pervious reporting date),” Mr. Bottomley said.
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ATB Capital Markets analyst Martin Toner made a hefty increase to his price target on Galaxy Digital Holdings Ltd. (GLXY-T) following the company’s third quarter results last week.
His target went to C$30 from C$20 while reiterating an “outperform” rating.
Galaxy reported a Q3/24 net loss of $53.6 million, less than the consensus of a $64.6 million gain and ATD’s estimate of a $31.0 million loss.
“The company also reported Partners Equity of $2,081mm, below our estimate of $2,109mm,” the analyst said in a note to clients. “Q3 counterparty trading revenue of $54mm beat our estimate of $35.0mm and was driven by a 15% q/q decline in trading volume. The release was highlighted by improving fundamentals and the announcement of an HPC [high-performance computer] deal. In Q3/24 Counterparty Trading Revenue was $54mm, and Lending and Staking Revenue was $74mm, both impressive results showing rapid growth. Galaxy also, announced that subsequent to quarter-end, it executed a non-binding term sheet with a “U.S.-based hyperscaler” to host high-performance computing at its Helios campus. According to the company, the term sheet includes options to allocate all of Helios’ 800 MW of power capacity to HPC hosting and support. We are constructive on the announcement, while acknowledging the uncertainties that remain.”
“Given the growth in trading, lending and staking revenue we increase our net income (NI) estimates. Higher NI, the balance sheet impact of higher BTC and ETH and adding value for the optionality of an HPC deal” drove the increase to his price target,” he added.
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RBC analyst Drew McReynolds raised his price target on Telus Corp. (T-T) to C$26 from C$25 after what he termed as a “solid” third-quarter earnings report. He reiterated an “outperform” rating.
“TELUS has not been immune to cyclical impacts on TELUS Digital and TELUS Agriculture and Consumer Goods (TAC), inflation impacts on TTech, and incremental competitive impacts in the wake of the Rogers-Shaw and Quebecor-Freedom Mobile transactions. Despite the more challenging operating environment, we expect TELUS to deliver industry-leading underlying growth and capital returns. We continue to see an attractive and improving growth and risk profile for the company reflecting: (i) a 2024E-2027E NAV CAGR of +8.2% underpinned by mid single-digit organic EBITDA growth, declining low double-digit capex intensity and double-digit FCF growth; and (ii) better visibility around the company’s ability to sustain industry-leading underlying EBITDA and FCF growth almost irrespective of most industry growth, competition and regulatory outcomes,” Mr. McReynolds said.
Elsewhere, Canaccord Genuity raised its price target on Telus to C$22 from C$21.50. “Nonetheless we are maintaining our HOLD rating given the near-term uncertainty with respect to wireless and still low visibility around a fuller turnaround in TELUS’ growth businesses,” said Canaccord analyst Aravinda Galappatthige.
The average analyst target is C$24.40.
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In other analyst actions:
Bank of America (BAC-N): Citigroup raises target price to US$54 from US$46 and upgrades rating to “buy” from “neutral”
BCE Inc. (BCE-T): Barclays cuts target price to C$41 from C$46
Brookfield Corp. (BN-N): TD Cowen raises price target to US$74 from US$63. TD said the market backdrop for the company is increasingly favourable.
Brookfield Renewable Corp. (BEPC-N): Wells Fargo raises target price to $35 from $33
Canada Goose Holdings Inc. (GOOS-T): BofA Global Research cuts price objective to C$13 from C$14
Enbridge Inc. (ENB-T): Barclays raises target price to C$59 from C$54
Exchange Income Corp. (EIF-T): National Bank of Canada ups PT to C$68 from C$61
GFL Environmental Inc. (GFL-T): Eight Capital raises target price to C$76 from C$70
Mattr Corp. (MATR-T): ATB Capital Markets raises target price to C$23 from C$18.5; National Bank of Canada raises target price to C$22 from C$19.50; Stifel raises target price to C$21.5 from C$18
Nuvista Energy Ltd. (NVA-T): National Bank of Canada ups to “outperform” from “sector perform” and raises price target to C$16 from C$14.50
Nvidia Corp. (NVDA-Q): Piper Sandler raises target price to US$175 from US$140; Morgan Stanley raises target price to US$160.00 from US$150.00
Osisko Gold Royalties Ltd. (OR-T): TD Cowen cuts to “hold” from “buy” with an unchanged price target of C$31. TD said it was simply a valuation call, given Osisko’s recent share outperformance versus its precious metals royalty peers.
Superior Plus Corp. (SPB-T): Scotiabank cuts target price to C$9 from C$12
Tesla Inc. (TSLA-Q): Wedbush raises target price to $400 from $300