Inside the Market’s roundup of some of today’s key analyst actions
Even though Rogers Communications Inc. (RCI-B-T) reported second-quarter results largely inline with expectations, Canaccord Genuity analyst Aravinda Galappatthige downgraded the stock to “hold” from “buy” given pressures on revenues.
He also trimmed his price target by C$2 to C$57.
“While the stock is inexpensively priced, particularly from a free cash flow perspective, we prefer to take a step back in light of sustained promotional pressure in the market and its impact on service revenue trends,” Mr. Galappatthige said in a note to clients. “With overall service revenue growth unlikely to get much better than 1% through H2/24, we see the balance sheet leverage of 4.7x, keeping the risk profile of the stock high, in the near term.”
Rogers’ wireless business showed a “meaningful” moderation during the quarter, he said. The cable business also remained under pressure. Consolidated service revenue growth was only 0.7% from a year earlier.
He warns of further challenges to come.
“The downswing in wireless network revenue growth in Q2, although still sector leading (we believe), represented a meaningful sequential slip of well over 200 basis points. This, coupled with the sustained promotional intensity we still see in the market, albeit in bouts, and the fact that we are moving into a seasonally active period for discounted offers (starting with back-to-school), suggests a further downtick in wireless service revenue growth, perhaps below 3% in the upcoming quarters,” he said.
“With that said, comments made by management suggest that ARPU [average revenue per user] growth could be maintained in positive territory and that underlying market volume growth remains robust (even with the impact of changes to temporary residents and student inflows),” he added.
Elsewhere, Cormark Securities cut its price target to C$72 from C$74.
The average analyst price target is now C$66.93, down from C$70.70 a month ago, according to LSEG data.
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National Bank Financial analyst Mike Parkin downgraded Novagold Resources Inc. (NG-T) to “sector perform” from “outperform”, citing valuation. He bumped up his price target to C$7 from C$6.50.
He notes that Novagold shares have recently outperformed its peer group on no major news or catalyst.
“Over the last three months, Novagold shares have outperformed the S&P/TSX Global Gold Index by about 49% with a significant portion of this outperformance coming in the last month,” Mr. Parkin said in a note to clients... “As a result of the share price appreciation, Novagold shares now trade well above the last twelve months months average enterprise value/resource valuation and are currently trading at a 52-week-high valuation multiple.”
“We could potentially become constructive on the name again following an updated technical report on the Donlin Gold project (last study released on Donlin Gold was the 2021 feasibility study, but the joint venture with Barrick Gold decided earlier this year to delay work on updating the FS for at least another year,” he said.
The average analyst price target is C$6.
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At least five analysts trimmed their price targets on Teck Resources Ltd. (TECK-B-T) after the miner cut its copper forecast because of grade problems at its QB2 mine in Chile.
Teck on Wednesday lowered its full-year copper forecast by just under 7 per cent to about 468,000 tonnes. The company also reduced its guidance on molybdenum, a key steel alloy, by 19 per cent.
The company said that its grades at QB2 will come in slightly lower than predicted in the second half of the year, because of both geotechnical issues and pit dewatering.
JP Morgan cut its target price to C$74 from C$76, while Scotiabank reduced its target to C$84 from C$85, Raymond James cut its target to C$70 from C$71, BMO cut its target to C$77 from C$80, and RBC cut its target to C$88 from C$91.
“Management believes the geotechnical issue can be rectified before the end of this year and does not anticipate an impact on 2025 or beyond production; however, this does leave lingering uncertainty around the operation, in our view,” RBC analyst Sam Crittenden said in a note. “We lower our 2024 production estimate -5%, to 447Kt from 473Kt, to reflect updated guidance and reduce 2025 production at QB by 10%.”
Mr. Crittenden is still recommending Teck to patient investors, however, reiterating an “outperform” rating.
“Despite another set back at QB, we still see Teck as a compelling investment over the next 6–12 months given the current valuation and copper price level, production growth into next year, and the large share buyback providing support in the market. Execution at QB remains the near-term risk/reward opportunity, and beyond that the focus can shift to other copper growth opportunities,” he said.
The average analyst price target is now C$74.78, down from $75.11 a month ago.
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Canaccord Genuity analyst Dalton Baretto trimmed his price target on First Quantum Minerals Ltd. (FM-T) to C$23.50 from C$25 in the wake of the company’s second-quarter results. He linked the action to Canaccord updating its estimates for the Kansanshi project in Zambia.
He had a positive view of the quarterly results overall.
“Financial results were better than we had anticipated, driven by margins at Kansanshi. Consolidated copper production was in line with our estimate, while gold production and sales were better than we had forecast, leading to higher revenue and EBITDA,” he said in a note. “While the power situation in Zambia remains challenged, FM has been able to mitigate this via imports and does not anticipate operational disruptions going forward.”
Mr. Baretto reiterated a “buy” rating.
“With the balance sheet and liquidity concerns now addressed, FM remains a copper producer of scale, with growth via the Kansanshi S3 project and significant optionality via a potential Cobre Panama restart (in addition to the greenfield pipeline) in a copper M&A market that remains warm. We note a number of de-risking events that were highlighted this quarter: opportunistic hedging with a floor above the current spot price; addressing the increasing power shortages in Zambia along with solid operations; putting guardrails around the Jiangxi ownership block with the new agreement; and engagement with the new Mulino administration in Panama.”
Elsewhere, Scotiabank cut its target price to C$18.50 from C$19.
The average analyst target is C$20.63.
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At least three analysts raised their price targets on Athabasca Oil Corp (ATH-T) following its earnings Wednesday night.
Atb Capital Markets raised its target to C$7.5 from C$7; National Bank of Canada raised its target to C$7.5 from C$7; and TD Cowen raised its target to C$6 from C$5.5.
“Overall, we view the quarterly results as positive,” said Atb analyst Patrick J. O’Rourke, who reiterated an “outperform” rating.
Second-quarter production was modestly ahead of estimates, and cash flow “notably ahead” - at $165.7 million versus the consensus at $155 million, he noted.
Athabasca also raised its 2024 corporate production guidance to 36.0-37.0 mboe/d (from 35.0-36.0 mboe/d prior) and capex guidance to $275.0 million (from $217.0mm).
The average price target is now C$6.56, up from C$6.19 a month ago.
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In other analyst actions:
Dri Healthcare Trust (DHT-UN-T): Truist Securities cuts target price to $14 from $17
Ford Motor Co (F-N): Goldman Sachs cuts target price to US$12 from US$14
Sirius XM Holdings Inc (SIRI-Q): Citigroup cuts to “sell” from “neutral”
Lululemon Athletica Inc (LULU-Q): JP Morgan cuts target price to US$338 from US$457 and removes stock from its analyst focus list - its favourite investment ideas.
Walmart (WMT-N): BMO raises target price to US$80 from US$75