Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BMO Capital Markets energy infrastructure analyst Ben Pham now prefers utilities over pipelines in his income-heavy sector,
“Q4/22 earnings season kicks off on February 3 with BEP first out of the gate. Following our analysis of public data sources, proprietary models, and detailed discussions with our coverage, we point to notable potential Q4/22 beats from TA, H, and TRP, and potential quarterly misses from INE, CU, and KEY and would position ahead accordingly. Looking to our 2023 set-up in Canadian Energy Infrastructure, our preference now is utilities over pipelines, with a tweak in our Top 5 Best Ideas: ALA, TA, NPI, PPL, and EMA (vs. last published of ALA, TA, PPL, BLX, and NPI) ... Where are we notably above consensus? 1) TA. Due to stronger-than-expected Alberta power prices ($214/MWh, 100% YoY), our recently raised $464M EBITDA is ~27% above consensus”
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This year should see another spate of high profile security hacks and this makes cybersecurity stocks among the most defensive among technology subsectors. Morgan Stanley analyst Hamza Fodderwala, however, sees profit estimates too high for many companies in the sector,
“Cybersecurity remains a top IT priority in 2023 and relatively most defensible in slowing macro (see Exhibit 10). However, throughout most of last year, the relative defensibility of security spend was confused with the notion that security is ‘recession proof’... As a result, most investors were surprised during Q3 earnings when multiple security bellwethers missed consensus topline forecasts and management teams weren’t fully prepared for the sudden shift in overall macro sentiment either… Where Guidance Could Fall Below Consensus? FTNT, TENB, RPD, CHKP, NET … Where Guidance Likely Falls In Line with Consensus? CYBR”
“Cybersecurity stocks relatively defensive but not recession proof (MS)” – (research excerpt) Twitter
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BofA Securities mining analyst Lawson Winder increased price targets for some companies, including one Canadian stock,
“Raising PO’s for FCX, HBM, CLF. Cleveland-Cliffs (CLF): We raise our CLF price objective (PO) to $22.50 (from $19) per share as we revise upwards our 2024 estimates for auto contract pricing. We rate CLF at Neutral. Freeport-McMoRan (FCX): We raise our PO for FCX to $50 (from $38) per share, on higher target multiples of 10x/9.75x 2023E/2024E EV/EBITDA (from 7.75x/7.25x), to reflect higher market multiples (in light of greater-than-expected copper price bullishness arising from the reopening of China). Note BofA’s 2023E copper price is sizably below spot (2023E = $3.82 per pound (/lb), H1′23 at $3.43/lb, vs. spot at $4.20/lb), suggesting near-term downside risk…Hudbay Minerals (HBM): We raise our HBM PO by 3% to C$8.25/$6.15 (from C$8.00/$6.00) per share based on a higher multiple to 3.00x/2.75x (2023/2024 EV/EBITDA) from 2.75x/2.25x to reflect increasing certainty in near-term copper production growth; partly offset by lower estimates on higher expected operating costs. We reiterate our Neutral rating as we see solid near-term growth balanced by high debt”
“BofA raises targets on some metals miners” – (research excerpt) Twitter
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Diversion: “AI Is Improving Faster Than Most Humans Realize” – Marginal Revolution
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