Inside the Market’s roundup of some of today’s key analyst actions
BMO Capital Markets analyst Thanos Moschopoulos thinks Lightspeed Commerce Inc. (LSPD-N, LSPD-T) stock could be “worth considerable more” on a takeout, pointing to “the potential scarcity value associated with LSPD’s size/scale, its depressed valuation, and its future earnings power as Payments penetration continues to ramp.”
On Wednesday, the Montreal-based point-of-sale software vendor confirmed it is up for sale, hiring U.S.-based investment bank JP Morgan Chase & Co. to run a strategic review of the business that includes a potential sale to a rival tech company or private equity fund.
“LSPD’s $91-billion TTM GTV [trailing 12-month gross transaction volume] makes it one of the largest assets in its space (i.e. retail/hospitality POS and omnichannel commerce for SMBs),” said Mr. Moschopoulos. “While the stock has struggled, the business has continued to grow (27-per-cent year-over-year revenue growth in Q1/25; 21-per-cent year-over-year gross profit growth) and profitability has been ramping.
“Further, LSPD’s has significant runway for better monetizing its GMV base—and a clear path towards achieving that, with Payments penetration (36 per cent in Q1/25) and ancillary offerings like Capital still ramping. Its TTM net take rate (gross profit/GMV) is 0.46 per cent versus 0.58 per cent for Shift4 and 0.71 per cent for Toast. Every 10 basis points of net take rate translates into $91-million of incremental gross profit (at likely a high operating margin).”
The analyst also acknowledged Lightspeed’s fiscal 2026 earnings power could be “well above” his current model if a sale does materialize.
“Our FY25/26 estimates are based on a presumption of how LSPD will choose to balance profitability vs. growth,” he said. “However, a different owner may choose to turn that dial differently — and with sales/marketing representing 41 per cent of our FY2026E net revenue, would have considerable flexibility to do so. For example, we believe FY2026E EBITDA of $100-million-plus could be achievable if profitability were to be further prioritized.”
Maintaining his “outperform” rating, he raised his target to US$20 from US$18. The average target on the Street is US$17.63, according to LSEG data.
“This assumes that the likelihood of a takeout has now increased, but isn’t a foregone conclusion (i.e. a potential takeout multiple might well be higher),” he said. “There’s a wide range of multiples for precedent transactions (and all of these businesses are quite different than LSPD); but most have been higher than our target multiple.”
Elsewhere, CIBC Capital Markets’ Todd Coupland maintained an “outperformer” rating an $35 (Canadian) target.
“The company’s valuation is heavily discounted due to it underperforming its peers,” said Mr. Coupland. “Lightspeed is undergoing a pivot that, in our view, can meaningfully improve its business plan execution and revenue growth, and expand adjusted EBITDA as F2025 progresses. This pivot expands Lightspeed’s options and should be attractive to both investors and potential acquirers. These factors provide us with confidence that Lightspeed shares are attractive.”
“In our view, Lightspeed’s shift in strategy could yield improved business plan execution and revenue growth, and expand adjusted EBITDA as F2025 progresses. We expect only modest changes in GTV and customer locations. An important offset will be higher subscription revenue from a refocused sales team, which is expected to reduce net churn in locations. We also expect selective subscription price increases, rising payments adoption and a 100-per-cent increase in merchant cash advances (MCA). These factors should yield higher-quality growth in subscription software revenue, which we forecast will accelerate from 6 per cent (FQ1/25) to 8-12 per cent in the second half of F2025. We expect improved adjusted EBITDA will come from higher revenue, a better mix and restructuring benefits. For F2025, we expect consolidated revenue growth of 22 per cent and adjusted EBITDA margins of 4 per cent.”
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While other supply chain technology companies in his coverage universe remain “primarily focus on organic growth,” National Bank Financial analyst John Shao sees The Descartes Systems Group Inc. (DSGX-Q, DSG-T) as “one of the premium consolidators in Canada with a proven ability to consistently acquire and integrate businesses to generate strong growth in revenue, profitability and free cash flow.”
“Over the past decade, the Company has more than tripled its revenue and increased its adjusted EBITDA fivefold, resulting in a more than 800 per cent increase in stock price,” he said. “If anything, we believe Descartes has ticked all the boxes to be considered a high-quality roll-up name based on a set of criteria we developed in our previous research: solid base business with healthy organic growth; proven ability to acquire and integrate; high-quality management team and strong balance sheet offers lots of optionality.”
In a research report titled The Flywheel is Already Spinning, Mr. Shao initiated coverage of the Waterloo, Ont.-based technology company, which hosts software and services solutions to power the logistics industry, with an “outperform” rating, emphasizing its organic growth and “disciplined” M&A.
“Candidly, for a business that focuses on the logistics market, Descartes is exposed to the sector’s volatility as factors such as supply chain disruptions, energy prices and economic conditions can cause fluctuations in the freight volume,” he said. “However, we do believe there is reasonable downside protection as the Company already built a recurring revenue stream with only 30 per cent of its revenue being transaction-based. Drawing from its performance in the most recent crisis (the COVID-19 pandemic), we have obtained incremental comfort over Descartes’ performance in the event of a future crisis. During the worst quarters of the pandemic (early 2020), Descartes’ year-over-year organic growth remained flat while freight volume was down as much as 19 per cent.
“During an economic downturn, we also believe Descartes could accelerate its pace of M&A to bring in more accretive deals at cheaper valuations, thus effectively turning a crisis into an opportunity.”
The analyst emphasized “simple math points to sustained stock price appreciation,” setting a Street-high target of US$125 per share. The current average is US$105.54.
“If you believe a Company’s stock price is the simple formula of the valuation multiple times the benchmark (e.g., adjusted EBITDA), we think those high-quality attributes will support a consistent valuation multiple.” he said. “At the end of the day, upside is merely driven by Descartes’ ability to grow its scale through acquisitions.”
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In a research report released Thursday titled Time to Take the Lid Off This One, National Bank Financial analyst Ahmed Abdullah initiated coverage of Winpak Ltd. (WPK-T) with an “outperform” rating, calling it “a niche packager with a solid consumer staples exposure in North America” and seeing a “long runway ahead for growth with ongoing investments.”
“Winpak is a leading integrated converter and manufacturer of high-quality packaging materials and innovative packaging machines,” he said. “With over 90 per cent of sales to the food & beverage and healthcare industries, it has a solid consumer staples exposure that delivers steady growth with a degree of resiliency to downturns when compared to the overall industry. Winpak’s smaller size versus its peers ($1.1-billion revenue vs. peer average $10-billion) allows it to remain nimble and accommodate various volumes of business mandates at higher margins.”
“Winpak’s medium-to-long-term revenue target is for 4-per-cent to 6-per-cent annual growth. Over the last 10 years, it had a revenue CAGR [compound annual growth rate] of just under 5 per cent, with the next wave of growth still to come. The Company is investing consistently in organic growth projects where it is expanding its capacity to handle additional volumes and focusing on new niches (healthcare & sustainability offerings) where growth potential exists across its portfolio. With an enviable net cash position that allows it to continue its expansion plans, we see a solid runway ahead for Winpak.”
Pointing to its focus on expanding its operating leverage by driving earnings growth above its top-line growth rates by 1 per cent to 2 per cent” Mr. Abdullah emphasized the Winnipeg-based company also has “consistently” landed above-average EBITDA margins versus peers (20 per cent versus 17 per cent), which “it aims to expand further towards the 22-per-cent margin level over the medium-to-long term.”
“Winpak leverages its unique position as part of a larger conglomerate (Wihuri International Oy) and utilizes the scale it gets when paired with its European sister company Wipak (private company) to benefit from economies of scale when applicable (e.g., joint raw material purchasing),” he added.
Also touting an “attractive valuation versus peers with upside potential,” he set a target of $55 for Winpak shares, exceeding the consensus on the Street by $3.
“WPK is trading at the bottom of the peer group average EV/EBITDA multiples despite its solid fundamentals (WPK 2025 estimated EV/EBITDA 6.2 times vs. peers at 7.8 times),” said Mr. Abdullah. “We believe Winpak’s fundamentals stack up well versus peers, which gives us all the more reason to argue that WPK should trade close to this peer average. In addition to EBITDA margins at WPK being higher than peers, its solid cash position (compared to 3.2 times average leverage for peers) positions the Company well for future investments. That is reflected in the expected CAGR [compound annual growth rate] for EBITDA from 2023 to 2025, as the peer average sits at 2.8 per cent while Winpak is expected to see a 5.4-per-cent CAGR.”
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Pointing to its “favourable” growth and margin outlook as well as a “attractive” valuation, “considering its notable discount versus peers,” TD Cowen analyst Michael Tupholme named AtkinsRéalis Group Inc. (ATRL-T) to the firm’s “Canada Best Ideas” list.
“We are positive on ATRL’s outlook and see the stock’s risk/reward profile as attractive” he said. “ATRL’s core Engineering Services Regions and Nuclear segments are well positioned to continue realizing strong organic revenue growth (up 14.9 per cent year-over-year and 31.0 per cent year-over-year, respectively year-to-date), supported by robust backlogs and favourable demand trends. Regarding margins, management is focused on driving margin improvement in ATRL’s largest segment (Engineering Services Regions, which accounts for 75 per cent of ATRL’s consolidated TTM [trailing 12-month] revenue). Finally, with leverage at 1.9 times net recourse debt-to-EBITDA and cash flow expected to show meaningful improvement this year, ATRL has considerably more capital allocation flexibility than in recent years.”
“We believe that some investors continue to over-emphasize the risks associated with ATRL’s remaining LSTK Projects work, and underappreciate management’s focus on margin improvement.”
Mr. Tupholme has a “buy” rating and $76 target for the Montreal-based company, formerly known as SNC-Lavalin Group Inc. The average is currently $69.50.
“We view strong execution over coming quarters, including ongoing solid organic growth, margin gains, the continued orderly wind-down of LSTK Projects work, and delivering on cash flow guidance as catalysts that will support expansion in ATRL’s valuation,” he said. “We also see a potential return to an investment grade credit rating and the announcement of tuck-in acquisitions (both nearer-term possibilities, in our view) as catalysts for the stock.”
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National Bank Financial analyst Vishal Shreedhar thinks a “soft consumer backdrop” will likely weigh on the third-quarter results of MTY Food Group Inc. (MTY-T), however he predicts free cash flow will be “strong.”
“We expect Q3/F24 performance to be challenged, reflecting moderating industry trends, partly offset by organic growth initiatives across the business and operating efficiency initiatives,” he said.
“Our expectation for negative sssg [same-store sales growth] reflects continued consumer pressure and cautious discretionary spending. Beyond the quarter, MTY will begin to cycle easier comparables. Our data suggests U.S. restaurant industry sales moderated to 4.1 per cent year-over-year (from 6.8 per cent year-over-year last quarter) and Canada restaurant industry sales improved to 5.0 per cent year-over-year (from 4.7 pe rcent year-over-year last quarter). MTY previously suggested that the focus on price is greater in the U.S. than in Canada. We believe consumer preference for QSRs (as suggested by consumer spending data) will be relatively supportive for MTY (79 per cent of store network is QSR).”
Ahead of the early October quarterly release, Mr. Shreedhar is forecasting system sales of $1.444-billion, revenue of $295-million and EBITDA of $70-million, all lower than the same period a year ago ($1.467-billion, $298-million and $73-million, respectively) and largely in line with the expectations Street.
“We model pressured overall trends, reflecting moderating industry demand, partly offset by organic growth initiatives across the business (broad-based digital/technology enhancements, new marketing approaches, new menu/store concepts, etc.) and operating efficiency initiatives,” he said.
“Investors will, in our view, focus on: (i) traction with sssg, (ii) organic store network stability, and (iii) outlook commentary and the consumer backdrop given ongoing macroeconomic concerns.”
Expecting “debt reduction and cost efficiencies to be priorities for management given elevated leverage levels and expectations for ERP spending to intensify over the next 12 months,” Mr. Shreedhar raised his target for MTY shares by $1 to $54 after an update to his valuation period, keeping an “outperform” rating. The average is currently $55.60.
“We value MTY at 8.0 times our F25/F26 EBITDA,” he said. “We believe valuation at 7.5 times our NTM [next 12-month] EBITDA versus the five-year average of 9.5 times is supportive. In addition, we believe that the F2024 free cash flow yield of 10 per cent is strong.
“That said, MTY’s limited acquisition interest in F2024 as well as signs of consumer stress could partially dampen investor appetite in the shares, at least until organic growth accelerates. We model positive sssg from Q1/F25 onwards.”
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Calling it a “U.S. base metals developer with global exploration prowess backed by [a] team with ‘Tier 1′ track record,” Eight Capital’s Puneet Singh initiated coverage of Ivanhoe Electric Inc. (IE-A, IE-T) with a “buy” rating on Thursday.
“In our opinion, there isn’t a copper vehicle that has an offering like Ivanhoe Electric as it’s a development, exploration, and technology Company wrapped into one,” he said. “On Consensus numbers, IE has traded on average at a 32-per-cent premium to its copper developer peers over the TTM [trailling 12-month] . We believe that premium was due to the market giving credit to IE’s executive team’s track record and its potential to leverage its exploration prowess (Typhoon + CGI) to make new discoveries. With copper sentiment having pulled back over recent months, IE’s premium has dissipated (currently 11 per cent; 52 week range: 3-67 per cent ) allowing investors an attractive entry point to buy the stock ahead of drilling results from Saudi Arabia, Santa Cruz’s advancement, copper sentiment returning, etc.”
Mr. Singh set a Street-high US$18 target, exceeding the US$15.67 average.
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In other analyst actions:
* CIBC World Markets’ Bryce Adams initiated coverage of Denison Mines Corp. (DML-T) with an “outperformer” rating and $3.25 target. The average is $3.97.
“We view Denison as an attractive uranium developer, with compelling economics, a near-term transition to the construction phase and limited financing risk. Further, we reiterate our positive outlook on uranium fundamentals and view Denison as well positioned to benefit from continuing uranium-related macro event,” he said.
* Desjardins Securities’ Gary Ho raised his target for AGF Management Ltd. (AGF.B-T) to $12.50 from $12 with a “buy” rating, citing higher assets under management from the recent market rally. The average is $11.46.
“AGF reported decent 3Q results, with in-line adjusted EPS/EBITDA while delivering positive retail net inflows,” he said. “Fund performance remains strong, with 60 per cent of strategies beating benchmarks. Offsetting these, the Kensington (KCPL) acquisition added unnecessary noise and SG&A is running higher than guidance. With $5.21/share in net investments, the shares trade at a compelling 2 times EBITDA.”
* Raymond James’ Brian MacArthur trimmed his Barrick Gold Corp. (GOLD-N, ABX-T) target to US$26 from US$26.50 with an “outperform” rating. The average is US$23.54.
* Desjardins Securities’ Lorne Kalmer moved his Primaris REIT (PMZ.UN-T) target to $18 from $17 with a “buy” rating. The average is $17.11.
“PMZ announced it has agreed to acquire Les Galeries de la Capitale in Québec City for $325-million ($320/sf), representing a 7.0-per-cent cap rate,” he said. “Overall, we like this deal as PMZ once again executes its external growth strategy in a disciplined manner with the acquisition of a pension fund–owned, market-dominant mall in a mid-sized city. We also discuss key takeaways from the investor day/property tour hosted at the Halifax Shopping Centre, including PMZ’s newly introduced three-year growth targets.”
* Scotia’s Jonathan Goldman resumed coverage of Savaria Corp. (SIS-T) with an “outperform” rating and $25 target. The average is $24.75.
“. Following several operational challenges in 2022 and 2023, we think investors view Savaria One (S1) targets as overly ambitious,” said Mr. Goldman. “However, our analysis suggests that between conservative industry assumptions and success on internal initiatives to date, the company can get most of the way to its goal of $200 million EBITDA in or exiting 2025 compared to $130 million in 2023. Even before considering upside from longer-cycle initiatives, like procurement and cross-selling, we think Savaria can comfortably compound EBITDA per share at 15 per cent through 2025 at least.
“With shares trading at 9.9 times EV/EBITDA on our 2025E, below the 10-year average of 12.0 times, we think investors view Savaria as a ‘show me’ story. But, year-to-date results demonstrate the transformation program is much further along than previously thought. The opportunity with Savaria is that upside surprises could lift both Street estimates and drive multiple expansion.”
* Seeing the trucking end market backdrop remaining “sluggish,” National Bank Financial’s Cameron Doerksen cut his TFI International Inc. (TFII-T) target to $209 from $221 with a “sector perform” rating. The average is $208.16.
“Given weaker than previously forecast end market conditions, we have lowered our Q3 estimates for TFII and have also trimmed our 2024 expectations,” he said. “We now forecast full-year 2024 EPS of $6.61, which is below management’s current guidance range of $6.75-$7.00. For 2025, we still assume margin improvement in LTL [less-than truckload] as well as a modest recovery in volumes across TFII’s segments, but have modestly lowered our forecast (but still assume a 30-per-cent increase in EPS year-over-year).”
“We continue to believe that the company will show margin improvement in future quarters as it executes on lowering costs in both its LTL and TL segments, and we also believe that the broader trucking end markets will be more supportive in 2025.”
* ATB Capital Markets’ Amir Arif trimmed his Veren Inc. (VRN-T) target to $12 from $13, remaining below the $14.38 average, with an “outperform” rating.
“Following a meeting with management, we believe that the underlying upstream assets are performing well with some key pads expected in H2/24 that would help the stock,” said Mr. Arif. “However, at the same time, the impact from third-party turnarounds and downtime associated with a facility expansion are slightly greater than what was previously reflected in our estimates, resulting in slightly lower H2/24 production estimates. In terms of well performance, while recent Karr wells are in-line with offset wells, these wells are showing flatter decline rates. Recent Gold Creek wells continue to clean up, showing improving well results. While some midstream debottlenecks/downtime are causing our H2/24 estimates to come down, VRN is putting in place some midstream connectivity redundancies to reduce potential impact from future third-party downtime issues. Key upcoming pads include a Gold Creek West pad offsetting the very strong 6-7 pad, an offset to the recent Karr South 5-23 pad, and a Duvernay pad in the western portion of the volatile oil window which has greater depth and increased pressure gradients, suggesting a potential for stronger well results with slightly higher costs. Finally, 2025 guidance is expected in December of this year. Bottom line, while our H2/24 production estimates are being reduced slightly, once VRN-operated facility debottlenecks (Q3/24), third party tie-in redundancies (Q4/24), and Gold Creek West plant expansion (Q4/24) are done, we believe that 2025 runtime should be smoother and upcoming well results and more production history on recent Karr/Gold Creek wells could help the stock.”
* Following its 2024 Investor Day event in Toronto, Eight Capital’s Ralph Profiti raised his Wheaton Precious Metals Corp. (WPM-T) target to $100 from $95, exceeding the $90.52 average, with a “buy” rating.
“Overall, the tone of the event was positive amid a bull market in gold prices and as senior management presented the merits of its high-quality, long-life portfolio with 93 per cent of production from assets in the lowest half of the cost curve and 28 years of implied mine life based on reserves, peer-leading organic growth of 40 per cent by 2028 from key assets including Salobo, Antamina and new development projects, strong corporate development momentum, and a solid balance sheet with $2.5-billion in liquidity (cash + available credit),” he said. “The event also showcased Wheaton’s long-term GEO production outlook, ESG and sustainability initiatives, and capital allocation priorities. In addition, key operating partners provided a thorough review of cornerstone operating assets and development properties.”