Inside the Market’s roundup of some of today’s key analyst actions
Barclays analyst Tim Long downgraded his rating on Apple Inc. (AAPL-Q) to “underweight” from “equal-weight”, citing several concerns, including sluggish sales of the new iPhone.
“IP15 has been lackluster and we believe IP16 should be the same. Other hardware categories should remain weak, and we don’t see Services growing more than 10%. We expect reversion after a year when most quarters were missed and the stock outperformed,” Mr. Long said in a note.
His price target was trimmed to US$160 from US$161. The average analyst price target is US$199.14, according to Refinitiv Eikon data.
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Beacon Securities analyst Ahmad Shaath downgraded Algoma Steel Group Inc. (ASTL-T) to “hold” from “buy”, believing that the stock’s recent outperformance versus peers has left it with limited upside. But his price target was raised to C$14 from C$11.
Algoma Steel shares rose 48 per cent during the fourth quarter, even matching the performance of US Steel, which has rallied amid a pending acquisition by Nippon Steel, Mr. Shaath noted.
“Valuation wise, ASTL also outperformed with its multiple expanding by >1.2x turns over the same period. The stock currently trades at EV/EBITDA (FY25E) of 4.2x vs. BF [blast furnace] peers group average of 5.7x (5.1x ex. US Steel). We remain of the view that ASTL shares should trade at a discount to this group, and we apply a 4.2x multiple to our revised FY25E EBITDA forecast to arrive at our $14.00 Target price. With potential upside of just 8%, we revise our recommendation to hold,” the analyst said.
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Atb Capital Markets has released a start of the year outlook for the Canadian Upstream and Integrated Oil and Gas sector, which includes lower price assumptions for crude and a warning to investors that making profitable trades is going to become more difficult.
“We expect continued strong medium- and long-term investment appeal for the Canadian upstream and integrated oil and gas sector, with markets continuing to navigate near term volatility and the impacts of macroeconomic challenges,” a summary of the report said. “These near-term challenges generally see our 2024 forecasts for industry profit margins and returns on capital modestly lower than 2023 (with some commodity price drive downward revisions with this update, primarily to gassier producers). As a result, profitability metrics remain above the long-term industry averages, but trail the 2022-2023 timeframe, and in our view, oil and gas stock picking in 2024 has become inherently more difficult as a result.”
For the first quarter, Atb cut its crude oil price forecast by US$5 a barrel to $75, representing little progress from the current oil price near $73. Atb is keeping its 2025 forecast unchanged at $70, and its long-term view remains at $60.
“We look at the oil macro for 2024 tenuously, with slight upside potential if the U.S. and Chinese economies stick soft landings and don’t see considerable slowdowns/recessions. More likely, we see downside potential for crude markets in 2024, with anticipated y/y growth of US and Russian supply, marked by 2023 US oil production YTD as of September up ~1.0 mmbbl/d y/y without a material change in global oil demand and with little sign of slowing down,” Atb said.
“In our view, we see the Q1/24 OPEC+ supply cut of 2.2 mmbbl/d as unsustainable, with OPEC+’s spare capacity estimated at 4.6 mmbbl/d (or ~4% of global demand), US oil production growing y/y, and without a material rise in global oil demand. OPEC+’s supply cut was not received well by the market for several reasons: the confusing message as each country separately announced its cuts rather than OPEC+ releasing one cohesive cut announcement, and with a level of disbelief that member countries will be compliant with the voluntary cuts,” the report said.
Alongside the somewhat downbeat outlook for oil fundamentals came several price target cuts. They were:
Birchcliff Energy Ltd (BIR-T): to C$8 from C$10
Tourmaline Oil Corp (TOU-T): to C$85 from C$92
ARC Resources Ltd (ARX-T): to C$26 from C$27
Crew Energy Inc (CR-T) to C$7.25 from C$8
Enerplus Corp (ERF-T) cuts target price to C$26.5 from C$27
Freehold Royalties Ltd (FRU-T) to C$19 from C$19.5
Kelt Exploration Ltd (KEL-T): to C$9 from C$9.25
Paramount Resources Ltd (POU-T): to C$37 from C$38
Spartan Delta Corp (SDE-T): to C$4.5 from C$5
Topaz Energy Corp (TPZ-T); to C$30 from C$32
Whitecap Resources Inc (WCP-T): to C$15.5 from C$16
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Scotiabank analyst Konark Gupta raised his price target on TFI International Inc. (TFII-T) after the transportation company announced the $1.1-billion acquisition of Dasek Inc. (DSKE-Q), which will nearly double the truckload business of TFI.
Management is now evaluating potential benefits of spinning off its TL segment in the wake of the acquisition, which is not expected to be accretive before 2025.
“We believe a potential separation would unlock value for shareholders based on our sum-of-the-parts (SoTP) analysis, which suggests a fair valuation of C$190 based on current fundamentals and peer valuations. A split could also potentially coincide with an eventual CEO transition, in our view,” Mr. Gupta said in a note to clients.
Scotiabank raised its target to C$180 from C$170, which reflected an expansion of its estimated earnings multiples amid increased probability of strategic outcomes. “However, we maintain our estimates at this time as we plan to revisit our model in the coming weeks, while it is becoming more likely that the prolonged weakness in organic fundamentals could partially offset DSKE accretion. We are keeping our Sector Perform rating intact based on relatively limited upside potential from current levels.”
The average analyst price target is C$173.16.
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TD Cowen analyst David Kwan raised his price target on Constellation Software Inc. (CSU-T) amid a busy start to the year on its M&A front.
On Dec. 28, Constellation announced an agreement to acquire the Curbside Management and Public Safety businesses from U.S. firm Conduent.
“Constellation is continuing to deploy its free cash flow on M&A at an elevated pace, with several large transactions expected to close in Q1/F24, including the Conduent CM/PS businesses, CREALOGIX, and Lumine’s Nokia Device Management/Service Management carve-out,” Mr. Kwan said in a note. “We estimate that these three deals alone account for about $500 million in upfront consideration.”
His price target rose to C$3,450 from C$3,250. The average analyst target is C$3,268.
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Oppenheimer analyst Hartaj Singh upgraded Moderna Inc. (MRNA-Q) to “outperform” with a US$142 price target.
“Key factors for our upgrade are increasing visibility on COVID-19 vaccine sales, a financial framework for OPEX progression (tied to sales), and key catalysts in 2024/25 that give us reason to believe that MRNA could be a five-product commercial company by 2026,” the analyst said. “We believe that MRNA’s execution in recent years has addressed the majority of our concerns. We see top-line sales starting to grow in 2025, with multiple product launches next 12-18 months (RSV, Influenza). We also expect material clinical and regulatory catalysts in this timeframe, making us bullish on the name again.”
The average analyst target is US$130.95.
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DA Davidson analyst Linda Bolton Weiser downgraded Hasbro Inc. (HAS-Q) to “neutral” from “buy” following the stock’s 20 per cent rally over the past two months even as concerns mount about the sustainability of its dividend.
“Signals point to management uncertainty about when the toy business will resume growth, and Wizards & Digital Gaming has a hard comparison in 2024 due to Baldur’s Gate 3. We estimate 2023 could be the second year that free cash flow does not cover dividends of about $400-million, and that the debt-to-EBITDA target of 2.5x is unlikely to be achieved until after 2025 unless the dividend is cut.”
Her price target on the toymaker was cut to US$53 from US$60. The average analyst target is US$58.75.
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In other analyst actions:
Bank of America (BAC-N): Barclays raises target price to US$43 from US$39
Best Buy Co Inc (BBY-N): D.A. Davidson raises target price to US$90 from US$85
BP (BP-N): Bernstein cuts target price to US$55 from US$62
Capital One Financial (COF-N): Barclays raises target price to US$154 from US$114
Carvana Co (CVNA-N): D.A. Davidson raises target price to US$55 from US$35
Citigroup Inc. (C-N): Barclays raises target price to $63 from $59
Citizens Financial Group Inc. (CFG-N): Barclays cuts to equal-weight from overweight but raises target price to US$40 from US$38
Electronic Arts Inc (EA-Q): Ascendiant Capital Markets raises price target to US$158 from US$146
Goldman Sachs Group Inc. (GS-N): Barclays raises target price to US$493 from US$437
Home Depot Inc (HD-N): D.A. Davidson raises target price to US$344 from US$320
JP Morgan Chase & Co. (JPM-N): Barclays raises target price to US$212 from US$186
Keycorp (KEY-N): Barclays raises target price to US$17 from US$13
Lowe’s Companies Inc (LOW-N): D.A. Davidson raises target price to US$258 from US$236
Lyft Inc (LYFT-Q): Nomura cuts to reduce from neutral but raises target price to US$13 from US$11.7
Morgan Stanley (MSRFX-Q): Barclays raises target price to US$116 from US$102
Regions Financial (RF-N): Barclays cuts to underweight from equal-weight and raises target price to US$22 from US$20
U.S. Bancorp (USB-N): Barclays raises target price to US$56 from US$48
Uber Technologies Inc (UBER-N): Nomura cuts to neutral from buy but raises target price to US$62 from US$59
Wells Fargo (WFC-N): Barclays raises target price to US$66 from US$54