WestJet Airlines Ltd. shares have lost considerable altitude since early summer, and by one valuation yardstick, they've even hit an all-time low.
CIBC World Markets Inc. analyst Kevin Chiang points out that on an enterprise value to forward EBITDA (earnings before interest, taxes, depreciation and amortization) basis, WestJet is trading at a record low 2.4 times 2012 consensus estimates. That’s in line with Air Canada , a stock that’s also had some brisk headwinds throughout this year, but cheaper than other discount airlines, he notes.
WestJet’s third-quarter results were below expectations and sentiment in the sector has taken a hit by the growing economic concerns.
However, with its shares trading as low as they are, Mr. Chiang sees a buying opportunity.
“WJA's balance sheet remains solid with its debt to capital ratio one of the lowest amongst the North American airlines, while its cash-to-TTM (trailing twelve month) revenue remains significantly above its target. Combined with its competitive cost structure, WJA is well positioned to manage through a slowing economy,” he said.
Upside: Mr. Chiang reaffirmed WestJet as a “sector outperformer” with a price target of $16.50.
CIBC World Markets Inc. analyst Adam Gill downgraded Arcan Resources Ltd. , citing operational challenges the oil and gas producer is expected to face this winter. He’s particularly concerned with the extra costs Arcan must absorb after flooding forced it to transport crude by truck in the Swan Hills area of Alberta instead of third-party oil pipelines.
Downside: Mr. Gill cut his price target by 75 cents to $7.25.
Although the upside in Metro Inc.’s share price is somewhat limited, it continues to be a good defensive stock, argued CIBC World Markets Inc. analyst Perry Caicco. “The grocers are heading for a troubled time period, but Metro's locations, acquisition history and margin discipline should keep it relatively isolated from the bigger issues,” he said.
Upside: Mr. Caicco maintained a “sector outperformer” rating and $53 price target.
Canaccord Genuity analyst Juan Plessis upgraded Emera Inc. to “buy” from “hold” after the slide in shares over the past month. He expects the company to deliver on its goals, which include an average earnings per share growth rate of 4 to 6 per cent. “Emera is a solid utility with proven management,” Mr. Plessis said.
Upside: Canaccord maintained its $34 price target.
Brookfield Renewable Power Fund units are attractively priced after declining about 10 per cent since the end of October, said Canaccord Genuity analyst Juan Plessis, who upgraded the company to a “buy.” He’s encouraged by the fund’s planned merger with Brookfield Renewable Power Inc., as the combined entity will have a stronger long-term growth profile.
Upside: Mr. Plessis maintained a $27 price target.