Inside the Market’s roundup of some of today’s key analyst actions
Seeing improving fundamentals, RBC Dominion Securities analyst Greg Pardy thinks investors should not expect any surprises from the first-quarter financial results for integrated oil and senior exploration and production companies.
“First-quarter results in energy land follow the recent release of year-end performance which wrapped up in March and should contain little in the way of drama from where we sit,” he said. “That’s a good thing in our minds. Indeed, on balance, first-quarter conference calls should be happy experiences for investors in Canada energy given a favorable oil landscape punctuated by progress towards net debt targets for many producers, rising shareholder returns and the approaching debut of the 590,000 bbl/d Trans Mountain Pipeline Expansion.
“We estimate that Canada’s oil sands weighted majors—Canadian Natural Resources, Suncor Energy, Cenovus Energy and Imperial Oil — generated free cash flow (before dividends and working capital movements) of $5.6 billion in the first-quarter, reduced net debt by $1.8 billion, repurchased $1.1 billion of their common shares and paid/accrued cash taxes (to all jurisdictions) of about $1.8 billion. On average, the share prices of our oil sands weighted majors rose about 21 per cent in the first-quarter, and possess further upside in our books.”
In a research report released Tuesday, Mr. Pardy upgraded his projections to reflect first-quarter actual commodity prices, disclosed share buybacks and “other various fine-tuning adjustments, in part due to weather impacts.”
“Our favorite senior producer remains Canadian Natural Resources (Global Top 30 and Global Energy Best Ideas lists), with Suncor Energy (Global Energy Best Ideas list) remaining our favorite integrated,” he said. “MEG Energy (Global Energy Best Ideas list) is our favorite intermediate producer. Cenovus Energy also sits on our Outperform roster.”
With those changes, he boosted his one-year target prices across the board “reflective of target multiple expansion driven by improving fundamentals.” His changes are:
* Canadian Natural Resources Ltd. (CNQ-T, “outperform”) to $120 from $100. The average on the Street is US$104.57.
* Cenovus Energy Inc. (CVE-T, “outperform”) to $32 from $28. Average: $30.57.
* Imperial Oil Ltd. (IMO-T, “sector perform”) to $100 from $85. Average: $90.61.
* MEG Energy Corp. (MEG-T, “outperform”) to $39 from $32. Average: $32.15.
* Ovintiv Inc. (OVV-N/OVV-T, “sector perform”) to US$61 from US$49. Average: US$57.44.
* Strathcona Resources Ltd. (SCR-T, “sector perform”) to $38 from $31. Average: $32.50.
* Suncor Energy Inc. (SU-T, “outperform”) to $58 from $52. Average: $52.11.
* Vermilion Energy Inc. (VET-T, “sector perform”) to $21 from $20. Average: $20.58.
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While he raised his first-quarter earnings projection for Ovintiv Inc. (OVV-N/OVV-T) after accounting for commodity prices, realizations and hedges, Citi analyst Scott Gruber warned investors should be cautious about their near-term expectations for the Denver-based exploration and production (E&P) company.
“We trim 1Q production to 568mboe/d [thousand barrels of oil equivalent per day] based on a slightly lighter TIL [turned-in-line] schedule and sit in-line with consensus,” he said in a note. “We estimate 1Q CFPS of $3.68, also in-line with consensus. TILs should pick up in 2Q, but pick up further in 3Q; thus we see risk to 2Q volumes (we’re 7mboe/d below consensus on total volumes). We’re also $50-million higher on 2Q capital at $620-million, as OVV will bring on a 6th Permian rig.
“Thus, we think investor expectations for 2Q FCF need to be tempered down. A 2H-weighted TIL cadence should support production in the back half of 2024. 2024 production guidance already accounts for the impact of Permian design changes/enhanced well performance, so the FY production guide of ~205mbo/d of oil/condensate has been maintained, as has FY capital guidance ($2.3-billion).”
Mr. Gruber is now projecting first-quarter earnings per share of US$1.37, rising 3 US cents from his previous expectation. His estimates for the second, third and fourth quarters fell to US$1.11, 99 US cents and US$1.08 from US$1.20, US$1.05 and US$1.14, respectively. Accordingly, his full-year forecast is now US$4.55, down from US$4.73 and below the Street’s consensus of US$6.34.
However, reiterating his “buy” recommendation, Mr. Gruber increased his target to US$64 from US$58 to reflect changes to the firm’s commodity price deck. The average target on the Street is US$57.44.
“While the equity has performed well recently (up 25 per cent year-to-date), we believe improving capital efficiency and solid operational performance (recent history of production and capital beats) supports our ongoing Buy rating. OVV continues to be a good option for investors looking for value within the energy sector.”
“We see better performance in early FY2024 given upside to production estimates, as we sit 2 per cent plus above consensus on oil and condensate production,” he said. “We believe its portfolio is under-appreciated (particularly the Montney), and see continued outperformance on the anticipation that gas markets tighten in FY2025. This not only would improve cash flow, but could spur better appreciation for OVV’s Montney position. Further, we find OVV trading attractively relative to its inventory life in part due to a heavier discount on their Canadian gas position.”
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Scotia Capital analyst Orest Wowkodaw predicts most miners will see first-quarter 2024 financial results “meaningfully deteriorate” on both a quarter-over-quarter and year-over-year basis, expecting a weaker seasonal operating performance to more than offset the benefit of slightly improved commodity prices.
“Overall, our estimates appear below current consensus expectations for most companies,” he added. “Despite the challenging operating environment, we do not anticipate any material guidance changes this quarter. We expect only a few company-specific catalysts with no improvements to shareholder returns. With the large and mid-cap producers currently trading at an elevated estimated average implied Cu [copper] price of $5.55 per pound (34 per cent above spot and a new record premium), it remains unclear if significantly improved investor sentiment will look through a potentially disappointing Q1 reporting season.”
Mr. Wowkodaw now sees his EBITDA estimates for large and mid-cap producers sitting on average 25 per cent below the consensus projections on the Street.
“Among the mid- to large-cap producers, we forecast CCO-T, CIA-T, CS-T, ERO-T, FM-T, HBM-T, IVN-T, LUN-T, NEXA-N, and TECK.B-T to meaningfully miss consensus EBITDA expectations, with only FCX-N expected to post a modest beat,” he said. “On an EPS basis, we forecast below-consensus results for all companies except for IVN-T; TECK.B-T is likely to post materially weaker than expected EPS due to QB2 accounting nuances (finance expense and minority interest). We profile our quarterly EPS, EBITDA, and guidance performance vs. consensus tracker ... and note that FCX-N has the best track record of meeting EBITDA expectations over the past four and eight quarters; ERO-T has the weakest.”
While he sees “elevated” valuations, Mr. Wowkodaw increased his target multiples for stocks in his coverage universe, pointing to a “markedly improved investor sentiment for commodity equities.
“As a result, our 12-month targets have increased by an average of 15 per cent for the large/mid-cap producers and by an average of 10 per cent for our coverage universe,” he said.
The analyst’s changes include:
- Altius Minerals Corp. (ALS-T, “sector perform”) to $21 from $19.50. The average is $23.91.
- Cameco Corp. (CCO-T, “sector outperform”) to $75 from $71. Average: $73.58.
- Capstone Copper Corp. (CS-T, “sector outperform”) to $10 from $8.50. Average: $9.11.
- Champion Iron Ltd. (CIA-T, “sector perform”) to $7 from $7.50. Average: $8.35.
- Ero Copper Corp. (ERO-T, “sector perform”) to $30 from $26. Average: $27.20.
- First Quantum Minerals Ltd. (FM-T, “sector perform”) to $15 from $13. Average: $16.84.
- Freeport-McMoRan Inc. (FCX-N, “sector outperform”) to US$55 from US$48. Average: US$49.96.
- Hudbay Minerals Inc. (HBM-T, “sector outperform”) to $13.50 from $11. Average: $11.18.
- Ivanhoe Mines Ltd. (IVN-T, “sector outperform”) to $18 from $15. Average: $17.08.
- Lundin Mining Corp. (LUN-T, “sector perform”) to $14 from $11.50. Average: $14.10.
- Teck Resources Ltd. (TECK.B-T, “sector outperform”) to $75 from $68. Average: $65.83.
“In our view, only FCX appears relatively well positioned heading into the Q1/24 reporting season,” he said. “Despite our Q1 concerns, TECK.B-T, CS-T, and CCO-T remain our Top Picks. We believe investors are likely to look through any potential near-term results disappointment for these three companies, particularly given the focus on new project ramp-up for CS-T and TECK.B-T, and the broader uranium/nuclear thematic for CCO-T.”
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Seeing “durable” demand and “fragile” supply, analysts at Canaccord Genuity remain “constructive” on the outlook for uranium prices for the remainder of the year.
“Overall, we remain constructive on the outlook for prices,” they said. “In our view, the market will remain in a structural deficit through 2027, and a return to a balanced market will be highly predicated on the advancement of greenfield projects, which remain beset with risks.”
“Demand for nuclear power is more durable than ever … As a low-carbon, reliable source of baseload energy, nuclear power is increasingly being viewed as critical to global decarbonization and energy security. At COP28, over 20 countries launched a declaration to triple installed nuclear energy capacity by 2050. This, among other developments, has led us to upgrade our demand forecasts. We now expect nuclear capacity to grow at a CAGR [compound annual growth rate] of 3.5 per cent through 2035 (vs. 3.2 per cent previously). Key drivers include new reactor builds (in China/India), extensions of operating lives, and restarts of idled reactors. Conservatively, our forecasts do not include the deployment of SMRs; we do, however, highlight recent announcements by major companies like Google and Microsoft that are looking at advanced nuclear as a way to power their AI ambitions.”
In a research report released Tuesday, the firm raised its long-term price to US$90 per pound from US$75-US$80 previously, expecting the reported term price will rise towards spot in 2024 despite volatility early in 2024.
“We have updated our estimates to reflect our latest price forecasts,” the analyst said. “On average, our target prices have increased by 13 per cent. Our preferred equity exposures are NXE and EU in North America; PDN and LOT in Australia; and KAP in the UK. For pure spot price exposure, we like U.UN (SPUT) and YCA.”
With that change, analyst Katie Lachappelle upgraded Texas-based Encore Energy Corp. (EU-X) to “buy” from “speculative buy” previously. Her target increased to $8 from $7, exceeding the $7.76 average.
“enCore Energy is one of our preferred ways to play the uranium space,” she said. “Within a matter of weeks, the company will have two operating mines in Texas. The Rosita plant commenced production in November 2023, and the Alta Mesa project is on track to start production in late April or early May. We project 450,000lbs U3O8 of production from Rosita, and 400,000lbs from Alta Mesa in 2024.
“The profitability of these operations is well protected, in our view. EU has implemented a sales strategy focused on securing a base level of projected income via established offtakes, while also preserving the potential for exposure to the spot market through uncommitted production. To date, EU has signed five utility contracts totalling 4.25mlb U3O8, beginning in 2024 and extending through to 2032 (covering less than 50 per cent of EU’s planned production).”
Target adjustments include:
- Cameco Corp. (CCO-T, “buy”) to $80 from $72.50. Average: $73.58.
- Denison Mines Corp. (DML-T, “speculative buy”) to $3.75 from $3.50. Average: $3.80.
- Fission Uranium Corp. (FCU-T, “speculative buy”) to $1.75 from $1.40. Average: $2.16.
- Nexgen Energy Ltd. (NXE-T, “speculative buy”) to $14 from $11.50. Average: $13.54.
- Sprott Physical Uranium Trust (U.UN-T, “buy”) to $35 from $31.50. Average: $36.50.
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While he reduced his earnings expectation for Innergex Renewable Energy Inc. (INE-T) due to “mixed” weather, National Bank Financial analyst Rupert Merer thinks its first-quarter results “should not disappoint” the Street.
“With a warm winter across North America, hydro production in Q1E looks strong, but wind production was a little weaker,” he said. “The month of March appears to have been a bit softer, and with that, we are now modeling EBITDA at $167-million (was $177-million, cons. $163-million). With production at 93 per cent of the LTA, the run rate for the company should be higher and consensus forecasts for Q1E seem conservative. Although the snow pack is low for this time of year, we believe it is too early to predict Q2E (but we model 85 per cent of LTA for B.C.) and that INE is on track for its guidance of $725-775-million (NBF $767 mln) for ‘24.”
In a research note released Tuesday, Mr. Merer noted shares of the Longueuil, Que.-based company have not yet rebounded from the announcement of a dividend cut in late February with changes to its capital allocation strategy.
“Prior to baking in a dividend cut, INE was trading between $9.00-9.50 per share,” he said. “Since announcing a 50-per-cent dividend cut to $0.36 per share (payout target of 30-50 per cent of FCF), INE has not rebounded. We believe the company should have $75-million per year additional capital for organic growth and share buybacks and an ability to grow by more than 200 MW/year (net interest).
“We believe investors in this sector prefer growth to yield and could ultimately reward the company when results return to growth (with normalized production and near-term organic developments). INE should find ample organic growth opportunities at home in Canada as multiple RFPs are being issued across the country in response to growing power demand. Canadian companies with strong community and First Nations relationships and operating leverage at home face less competition.”
Seeing it “cheaper than peers with growth coming,” he reaffirmed his “outperform” rating and Street-high $15 target for Innergex shares despite his lowering his forecast. The average target is $11.06.
“We believe INE should add more than $150-moillion in EBITDA by ‘25 vs ‘23 (more than 20-per-cent growth) with organic growth that is already financed (including the 330 MW Boswell Springs project) and better weather,” said Mr. Merer. “The company trades at a cash flow yield of 10.2 per cent on 2023E, a discount to peers. The company is budgeting up to $40-million for development activities ($27-million in ‘23), where it should grow its 10 GW pipeline and advance existing pipeline projects (more than 450 MW in the development pipeline).”
“We maintain our Outperform rating, viewing INE as the best value pick in our coverage universe trading at an implied discount rate of more than 13 per cent.”
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Desjardins Securities analyst John Sclodnick likes Karora Resources Inc.’s (KRR-T) planned merger with Australia’s Westgold Resources Ltd., seeing it providing shareholders with “an immediate premium, plus continued material exposure with half of the combined company for continued participation in the resource growth and exploration potential on the properties.”
“When rumours of a transaction were confirmed, we had thought there was room for a potential premium of 30 per cent but were concerned that a merger of equals might not offer a premium; we are thus very pleased to see both a premium of 25 per cent to the companies’ 20-day VWAP[volume-weighted average price], along with continued exposure to Beta Hunt and Higginsville,” he said. “We were surprised to see the shares trade below the deal price, and think this may be at least partly due to a misunderstanding of the value of the spinco, arbitrage funds not playing the spread due to the listings on the ASX and TSX, or perhaps some investors simply buying on the confirmed rumours and then selling on the news. That said, we expect the gap to narrow heading into the closing of the transaction.”
Mr. Sclodnick moved his recommendation for shares of Toronto-based Karora to “tender” from “buy” previously in response to Sunday night’s deal announcement, which will see Westgold acquire all of the company’s shares. Current Karora shareholders will receive 2.5241 WGX shares (approximately $5.14 per share), 61 cents in cash and 0.30 shares of a new spinco.
“Upon completion of the deal, existing Karora shareholders will own 49.9 per cent of the merged company, which is expected to have a combined market cap of $1.9-billion, making it one of the five largest ASXlisted Australian gold producers,” the analyst said. “The transaction is estimated to yield $187-million in operating synergies and $251-million in corporate savings, largely from procurement and supply chain savings through increased scale, and the elimination of duplicate corporate, operational and administrative functions. Additionally, Westgold has equipment at its operations that can be sent to some of Karora’s underexplored and underdeveloped assets that Karora has not been able to prioritize given its focus currently on the Beta Hunt expansion. An example of an opportunity in Karora’s portfolio is its Mount Henry deposit, which has 1moz at 1.3g/t and significant potential to be a value driver at current gold prices if cash, equipment and personnel can be allocated to advancing the project. We are also excited for the merged company to test exploration targets, including the Lake Cowan target on the Higginsville property and the Gamma gap zone at Beta Hunt. The combined company will be listed on the ASX, TSX and OTCQX and should see increased share demand from its expected inclusion in the ASX 200 and GDX indices.”
He cut his target for Karora shares to $5.90 to reflect the offer from $6.40. The average on the Street is currently $6.75.
“With Karora shares closing at $5.42, we would continue to hold and tender into the offer as we expect the value gap between our estimated value of the offer and the current share price to close,” he said. “Moreover, we see a strong likelihood of further share price appreciation on both potential index inclusion in the ASX 200 and GDX, and the realization of operational and corporate-level synergies — which is not factored into our estimated value.”
Elsewhere, Canaccord Genuity’s Jeremy Hoy trimmed his target to $6.73 from $7.75 with a “buy” rating.
“In our view, the transaction makes strategic sense and creates a company with improved scale and flexibility with a pro forma asset base that is located entirely in Western Australia. WGX shares ended the trading day on the ASX essentially in-line, ending the day down A$0.01 at A$2.27. We believe a competing bid for KRR is possible, although low probability, and note that there are several gold developers and producers in the region surrounding KRR’s tenement package,” said Mr. Ho.
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BMO Nesbitt Burns analyst Jeremy McCrea reinstated coverage of a group of Canadian energy companies on Tuesday:
* Baytex Energy Corp. (BTE-T) with a “market perform” rating and $6 target. The average on the Street is $6.20.
Analyst: “One of the top plays over the last few years has been the Clearwater, where Baytex has also shown to have some of the top wells in the formation. Combined with early strong exploration Duvernay and Eagle Ford results and a heavy oil fairway ripe for multi-lateral exploration, there is plenty of potential upside. Although we would like to see higher ‘value creation’ / growth (vs. 1-4 per cent per year), management has been prudent in finding balance between debt repayment and shareholder returns (buyback/ dividends), while strategically positioning for higher oil prices.”
* Crew Energy Inc. (CR-T) with a “market perform” rating and $5.25 target. Average: $6.48.
Analyst:” The volatility in commodity prices has not been kind to E&P names, especially for smaller-cap operators. But that’s the disconnect we see. Investors have grouped Crew with other operators whose valuations are reflective of near-term FCF sustainability/ dividend requirements, when the valuation premise for Crew should instead be reflecting long-term commodity upside. For Crew, it’s one of the last remaining gasweighted mid-cap names in B.C., with an immense, undrilled Montney fairway, where an LNG operator could still secure the less expensive gas molecules today.”
* Kiwetinohk Energy Corp. (KEC-T) with an “outperform” rating and $17 target. Average: $18.25.
Analyst: “Kiwetinohk was one of the first companies to recognize investor appetite for a renewable business division in 2021. Unfortunately, sentiment quickly changed as industry economics and Alberta regulation became uncertain, weighing on KEC’s share price and valuation. However, behind the scenes, the company has studiously put together a Duvernay land position, where recent results rank among the top in the formation. With capital shifting almost entirely back to Oil & Gas development, we think this large pivot to growth should bring back interest into Kiwetinohk.”
* Kelt Exploration Ltd. (KEL-T) with an “outperform” rating and $8.50 target. Average: $8.18.
Analyst: “Kelt is a well-capitalized company with significant land acreage focused in the Montney and Charlie Lake plays. As Kelt takes much of its exploration learnings and applies these concepts in a much more aggressive development plan, the company should see top quartile growth over the next couple of years. As investors gain comfort in the quality and duration of this inventory (especially in Oak), a higher multiple premium should be rewarding for shareholders, especially as this growth comes to fruition.”
* Logan Energy Corp. (LGN-X) with an “outperform” rating and $1.25 target. Average: $1.50.
Analyst: “Over the past decade, there have only been a few management teams that can point to a track record of M&A success and a capacity to generate meaningful shareholder value. With insiders owning 21 per cent and a goal of growing production more than 50 per cent per year via M&A for the next few years, there is considerable alignment for growth-oriented investors. In the meantime, the company has a good starting package with 500+ Montney locations. If Logan can execute and successfully showcase well results utilizing modern completion technology, we think there is meaningful upside.”
* Lucero Energy Corp. (LOU-X) with a “market perform” rating and 75-cent target. Average: 82 cents.
Analyst: “Lucero is an off-the-radar U.S. Bakken producer and despite having a seasoned management team with a track record of success, we think the valuation remains quite low. As such, the company will likely look to consolidate assets through smaller accretive tuck-in acquisitions, where eventually, size should start to attract new interest. Overall, with a growing net cash balance, and a steady NCIB that looks to expand in 2024, we believe the company has plenty of optionality. Unfortunately, given the liquidity, we find many investors are in a wait-and-see mode today.”
* NuVista Energy Ltd. (NVA-T) with an “outperform” rating and $17 target. Average: $15.23.
Analyst: “We believe NuVista is one of the few E&P companies with ‘permission to grow.’ With top-quartile production rates, it is one of the few companies that is not penalized for a no-dividend policy. A key reason is the previously built infrastructure to support this growth, but more importantly, the superior Montney results (at Pipestone and Gold Creek). Overall, the company is taking a ‘make hay while the sun shines’ mentality, and with recent exploration success and more inventory being added, there is a lot to like today.”
* Obsidian Energy Ltd. (OBE-T) with an “outperform” rating and $16.50 target. Average: $13.56.
Analyst: “Obsidian is one of those companies that has undergone significant change over the past few years. Between restarting its Bluesky/Clearwater operations and shifting from a debt repayment strategy to one of higher growth, we believe there now is more clarity for investor perception/understanding. As well economics, margins, and leverage all improve and the company takes a position as one of the fastest growing oil names in the basin (20 per cent plus), we suspect the company’s valuation will benefit in turn — especially as follow-up wells in the Bluesky Walrus field come online.”
* Paramount Resources Ltd. (POU-T) with an “outperform” rating and $37 target. Average: $33.70.
Analyst: “We believe Paramount is one of the more unique E&P businesses with a number of non-producing / hard-to-value assets, that have generally been ignored by investors (especially its long-duration, heavy oil holdings of Cavalier and its Horn River/Liard Basin gas prospects). More near-term will be the top quartile Montney and Duvernay results, especially as newly enhanced drilling/completion designs are implemented throughout. Overall, Paramount’s ‘value creation’ looks very impressive, and despite recent surface level distractions that impact quarterly results, sub-surface fundamentals remain intact, that ultimately drive the value of the business.”
* Rubellite Energy Inc. (RBY-T) with an “outperform” rating and $4 target. Average: $3.78.
Analyst: “Rubellite ticks the boxes on what we consider to be two of the most important characteristics for a successful operator: a strong experienced management team and high-quality inventory. Rubellite is one of the smallest pure play Clearwater operators, however, it’s quickly amassing one of the larger land positions with 530+ net sections. Although much of this land is still exploratory, recent success in Figure Lake (where results are more than 50 per cent above type-curve), should help keep growth meaningfully above average for the next few years at least.”
* Spartan Delta Corp. (SDE-T) with an “outperform” rating and $5.50 target. Average: $4.75.
Analyst: “Bottom Line: After the successful consolidation/development and sale of SDE’s Montney asset in 2023, management is at it again, this time in the Duvernay. As technology has progressed, we’re starting to see a pivot in economics for this formation, with increasing attention from more mainstream investors. Combined with a strong balance sheet for further acquisitions, and plenty of Duvernay land (and results) yet to be fully disclosed publicly, we’re very encouraged for what could transpire — especially if it follows the successful track record seen with prior companies.”
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In other analyst actions:
* In response to the close of its US$350-million funding, Stifel’s Ian Gillies trimmed his Algoma Steel Group Inc. (ASTL-T) target by $1 to $15 with a “buy” rating. The average is $14.50.
“We view the debt issuance positively given it bolsters ASTL’s balance sheet to support EAF [Electric Arc Steelmaking] completion and transition, which was one of the four key catalysts we highlighted two months ago,” he said. “With the company’s successful re-start of the steel plant, we are now left with two catalysts for the next 12-months that are going to significantly impact the company’s stock performance, aside from commodity price changes. This includes: 1) delivering the EAF project in the prescribed cost range of $825-875-million, which we believe is on track; and 2) depicting reasonable profitability during the EAF transition period beginning in 2025.”
* Barclays’ Kannan Venkateshwar cut his targets for BCE Inc. (BCE-T, “equalweight”) to $48 from $52 and Rogers Communications Inc. (RCI.B-T, “overweight”) to $63 from $70. The average targets on the Street are $53.40 and $74.07, respectively.
“The tough competitive phase in Canadian telecom will likely be painful for operators to dig out of, and the worst may not be over,” he said.
* Piper Sandler’s Abbie Zvejnieks cut her Lululemon Athletica Inc. (LULU-Q) target to US$470 from US$525, keeping an “overweight” recommendation. The average is US$474.14.
“We continue to like LULU’s positioning within performance, but we are taking a more conservative approach to North America growth given signs of a fickle teen ‘fashion’ consumer and tough teen customer acquisition compares,” she said. “LULU saw tremendous teen customer acquisition in 2022 and 2023, underpinned by the percentage of females teens citing lululemon as a ‘new brand’ that they are wearing, but as this percentage has come down in the Spring, we think customer acquisition will decelerate. Additionally, we are seeing lululemon lose share in overall favorite apparel brand which could point to fashion shifts and/or price sensitivity. Alo Yoga and Vuori have started to gain share, but unlike athletic players that have stumbled in the past, we do not think LULU has lagged on product innovation. We believe the recent sell off is overdone, but given our slightly softer North America outlook, we are decreasing our PT.”
* Stephens’ Daniel Imbro resumed coverage of TFI International Inc. (TFII-N, TFII-T) with an “overweight” rating and US$190 target, while JP Morgan’s Brian Ossenbeck added the stock to the firm’s “U.S. analyst focus list.” The average target on the Street is US$165.27.