Inside the Market’s roundup of some of today’s key analyst actions
Canaccord Genuity analyst Scott Chan upgraded Canadian Imperial Bank of Commerce (CM-T) to “buy” from “hold” after the lender’s better-than-expected quarterly earnings on Thursday.
He also raised his price target to $110.50 (Canadian) from $99.
CIBC reported adjusted cash earnings per share of $2.71. While down 13 per cent from a year earlier, it easily beat consensus of $2.19.
Mr. Chan cited six reasons for his upgrade: (1) better prospects for loan growth, including in mortgages, credit cards and U.S. commercial markets; (2) potential for better margins in fiscal 2021; (3) its disciplined approach on costs; (4) improved capital flexibility to support organic growth; (5) lower relative valuation against other banks; and (6) an attractive dividend yield of 5.6 per cent.
Elsewhere on the Street this morning, Credit Suisse raised its price target on CIBC to $102 from $95, RBC raised its target price to $110 from $95, Scotiabank raised its target by $1 to $112, TD Securities hiked its target to $120 from $110, and Desjardins Securities raised its target to $106 from $96.
The median price target among analysts for CIBC is now $108.50 (Canadian), up from $94 a month ago, according to Refinitiv Eikon data. There are five buy ratings, nine holds and one sell.
“This quarter reinforced our view that CM’s balance sheet and capital versus its exposure to sensitive loans is quite solid. Coupled with a better economic outlook we believe a higher valuation is justified,” RBC analyst Darko Mihelic commented in explaining his price target hike. But Mr. Mihelic maintained a “sector perform” rating, adding that “underlying business/revenue momentum is still relatively light.”
Credit Suisse analyst Mike Rizvanovic echoed those reservations in maintaining his “neutral” rating on the stock. “Given the bank’s persistent underperformance over the past two years, we believe more improvement is required to gain investor confidence and justify a valuation closer to the peer average as we note that current consensus EPS for CM implies that the bank will earn 17% less in F2021 than it did in F2018; that compares with a much lower 7% average decline for its peers,” Mr. Rizvanovic said.
Several analysts raised price targets on Toronto-Dominion Bank (TD-T) after quarterly results on Thursday that revealed adjusted EPS of $1.25, two cents better than the Street consensus.
Canaccord Genuity raised its target to $64 (Canadian) from $60.50. National Bank of Canada raised its target to $71 from $68.
RBC raised its target to $69 from $61, with analyst Darko Mihelic commenting, “We underestimated TD’s desire to become the best capitalized bank in Canada and to build reserves. Its lackluster growth in Canada and tough environment for its U.S. business will be TD’s next challenge to overcome.” He maintained a “sector perform” rating.
Mr. Mihelic said he increased valuation multiples for all the large Canadian banks. “For TD specifically, we believe a higher valuation multiple is warranted given its capital position and much improved reserves but we stop a little short of its historic premium on slipping momentum in Canada P&C and a tough outlook for its U.S. segment,” he added in a note.
Desjardins Securities analyst Doug Young raised his target to $71 from $66 and reiterated a “buy” rating, even while commenting that his overall impression of the earnings report was neutral. “A beat, but by less than its peers given its lower exposure to capital markets (a segment that did well this quarter) and higher exposure to banking (net interest margin and fee compression),” he commented. “That said, its CET1 ratio is now the highest of the group, and while tough to gauge relatively speaking, it appears to be prudently building allowance for credit losses.”
The median price target on the Street is now $67 (Canadian), up $3 from a month ago. There are three buy ratings on the stock, 10 holds, and one sell.
Several analysts raised price targets on BRP Inc. (DOO-T) after its earnings beat on Thursday and improved guidance that benefited from the pandemic bringing a strong inflow of new customers to the powersports industry.
Desjardins Securities analyst Benoit Poirier raised his price target to $84 from $64 and said he remains bullish on the stock.
“BRP delivered another solid quarter despite COVID-19. We are pleased with the continued momentum in powersports retail (+40% in 2Q), which has been fuelled by the strong inflow of new BRP customers ( about 77% of powersports customers in 2Q). Management remains focused on its strategy to introduce innovative new products to drive retail momentum and market share gains with two virtual product launches in the next month,” Mr. Poirier said in a note.
He reiterated a “buy” rating, adding “We continue to see significant potential for long-term value creation as BRP executes on its five-year strategic plan, which remains on track despite the pandemic.”
BRP reported revenue of $1.233-billion, well ahead of the consensus expectation of $947. Normalized fully diluted EPS of $1.14 was well above consensus that was bracing for a loss of 24 cents. BRP introduced much better-than-expected fiscal year 2021 normalized fully diluted EPS guidance of $3.65–3.95. Consensus was $2.
Elsewhere, RBC raised its target price to $78 from $66. And TD Securities raised its target to $85 from $74 while upgrading its rating to a “buy” from a “hold.”
The median target on the Street is now $78, up from $56.50 a month ago. There are now nine buy ratings on the stock, four holds and no sells.
RBC analyst Robert Muller upgraded Dell Technologies Inc. (DELL-N) to “outperform” from “sector perform” and nearly doubled his target price to US$80 from $48. The action followed an earnings beat this week, but Mr. Muller’s move also reflected Dell announcing it was exploring a spin-off of its 81 per cent stake in VMWare Inc., a provider of virtualization solutions.
“With a VMW spin on the table, we see a clear path by which Dell can unlock the value of its stake in VMW. In addition, we believe Dell’s steadily improving balance sheet is positioned to withstand additional COVID-19 (or other) macro shocks, and we have increased confidence in Dell’s ability to deliver on its longer-term objectives, including achieving investment grade ratings,” Mr. Muller said in a note.
At least two other analysts also raised targets on Dell: Credit Suisse’s target went to $60 from $54, and JPMorgan’s went to $70 from $68.
BMO analyst Stephen MacLeod said he views the US$300-million equity investment announced Thursday in Tricon Residential Inc. (TCN-T), led by Blackstone REIT, positively.
“Most importantly, the investment is an incrementally positive validation of Tricon’s business model, and a vote of confidence from one of the world’s largest real estate investors into Tricon’s rental housing portfolio,” Mr. MacLeod said in a note.
The proceeds of the deal will be used to reduced debt levels.
”We view Tricon as having multi-year growth opportunities for FFO (funds from operations) and BVPS (book value per share), while leveraging third-party capital to drive growth,” he added.
Mr. MacLoad continues to rate Tricon shares “outperform” and he increased his price target by 50 cents to $12.50. Scotiabank also raised its target on Friday by 50 cents to $12.
In other analyst actions:
Fortuna Silver Mines Inc. (FVI-T): PI Financial raises target price to $10 from $8.6 and raises rating to “buy” from “neutral.”
Metalla Royalty & Streaming Ltd. (MTA-X): PI Financial cuts to “neutral” from “buy” and raises target to $10 from $9.25.
Pan American Silver Corp. (PAAS-T): PI Financial raises target price to $54 from $48 and upgrades rating to “buy” from “neutral”.
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