While we are only a few weeks into the new year, there are already some notable movers.
Leadership
Last year, the technology sector was the best performing sector in the S&P/TSX Composite Index with a price return of 69 per cent, and it remains the top performer this year with a gain of nearly 6 per cent. Shares of Celestica Inc. (CLS-T) and Constellation Software Inc. (CSU-T) continue to march higher, despite the fact that Street believes the share prices are fully valued based on the average target prices.
In the energy sector, uranium stocks continue to dominate. In 2023, the top performing stock in the sector was Cameco Corp. (CCO-T), rallying roughly 86 per cent. Year-to-date, its share price is already up 9 per cent.
Turnarounds
There are a few interesting turnaround stories.
First, in the consumer discretionary space, shares of Aritzia Inc. (ATZ-T) have rebounded. Last year, Aritzia was the worst performing stock in the consumer discretionary sector with a loss of over 40 per cent. This year, the stock is the best performing stock, not just in the consumer discretionary sector but out of all 225 stocks in the S&P/TSX Composite Index.
Year-to-date, the share price is up over 24 per cent. Despite this gain, the Average target price is relatively unchanged. The average target price is currently sitting at $34.56, slightly ahead of the target of $33.80 as of Dec. 31.
Another notable turnaround is the communications sector, which was one of the worst performing sectors in 2023 with shares of Cogeco Communications Inc. (CCA-T), BCE Inc. (BCE-T), Telus Corp. (T-T) and Rogers Communications Inc. (RCI-B) all down for the year.
However, 2024 is a different story. This sector is the second-best performer, behind technology, with a price return of 4.6 per cent. Year-to-date, every single stock in the sector is in the green with returns of between 3 per cent and 6 per cent.
As we work our way through this earnings season, analysts will be revising their expectations.
Now, here’s a look at analysts’ current outlooks for Canadian stocks.
This report includes a link to a list of analysts’ target prices, recommendations, forecast returns, and yields for all securities in the S&P/TSX Composite Index grouped by sector and ranked according to their expected price returns (excluding dividend and distribution income).
The posted target price for each security is an average of all available target prices from analysts. A target price typically reflects an expected share or unit price 12 months from now based on an analyst’s financial modelling, such as a discounted cash flow or sum-of-the-parts model. For the yield provided, Bloomberg calculates this figure by annualizing the most recent announced dividend or distribution value.
It’s important to note that high target prices, which imply stellar returns that seem unbelievable may be just that - unrealistic. At times, when a stock price falls analysts may maintain their bullish expectations, inflating the forecast return. In addition, an outlier (extreme target price) can skew the average target price, to the upside or downside, particularly when the number of analysts covering a stock is low. Don’t let a huge projected gain lure you into a position – it is critical to look at the company and industry fundamentals.
Jennifer Dowty