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Inside the Market’s roundup of some of today’s key analyst actions

Citi analyst Prashant Rao opened a 30-day positive catalyst watch for Suncor Energy Inc. (SU-T), predicting “strength” in its fourth-quarter financial results may reverse its shares’ relative underperformance versus peers over the last several months.

“We think 4Q results will show a material sequential improvement in FFO [funds from operations] per share, based on sound Upstream performance and continued Downstream resiliency,” he said. “We also see upside to 2021 estimates on higher oil prices and tax benefits, which we think increase the potential to deleverage faster and deepen return of shareholder capital.”

“As SU wrapped up its Upstream turnarounds in October, we expect production to have been strong through the remainder of the quarter, in line with the higher end of the company’s guidance. We expect 650 mbpd [thousand barrels per day] of production from Oil Sands, up 25 per cent quarter-over-quarter, while E&P production is likely flat to incrementally up. For Downstream, our 94-per-cent utilization for 4Q is towards the high end of SU’s guidance and we see $3 per barrel higher GRMs quarter-over-quarter. We expect a more muted FIFO [first‑in, first‑out] gain versus 3Q – we model less than half 3Q’s $160-million.”

Mr. Rao raised his FFO estimate for the fourth quarter to $1 from 83 cents and his 2021 projection to $5.37 from $4.79 based on “updated operational data and commodity assumptions.”

Keeping a “neutral” rating for Suncor as he cautioned about the potential for execution risks on heavy Upstream turnarounds in the first half of 2021, he hiked his target to $26 from $16. The average on the Street is $26.23.

“We opened a pair trade idea to overweight IMO and underweight SU on Oct. 28 as we saw several factors that favored IMO shares’ performance over SU shares, including B/S strength and materially rising FFO vs near-term earnings/execution risk at SU,” he said. “Since end-October IMO has outperformed vs SU (see Fig. 1). However, this looks to be reversing in our opinion given apparent mean-reversion in the CF multiple spread and our view of an inflection in SU shares around 4Q results. We are therefore closing the pair trade idea.”


In response to its proposed takeover of French grocery giant Carrefour, Barclays analyst Jim Durran lowered Alimentation Couche-Tard Inc. (ATD.B-T) to “equal weight” from “overweight” with a $37 target, falling from $53. The average target on the Street is $51.78.

Elsewhere, CIBC’s Mark Petrie lowered his target to $46 from $52 with an “outperformer” rating.

“Couche-Tard’s interest in acquiring Carrefour (CA) has stunned the market and investors have shaved over $6-billion in value in reaction,” said Mr. Petrie. “We similarly question the strategic fit, as well as the read-through to ATD’s other acquisition opportunities. At the same time, we also value the stellar track record in operations, M&A and capital allocation. Regardless of how this plays out, we believe the market will place a greater discount on future M&A and have moderated our target multiple to 20 times (was 22 times).”


With its shares currently trading “well below” the implied price from its proposed merger with Tilray Inc. (TLRY-Q), Canaccord Genuity analyst Matt Bottomley upgraded Aphria Inc. (APHA-T) following Thursday’s release of better-than-anticipated financial results.

For the second quarter of fiscal 2021, Aphria reported revenue of $160.5-million, up 10.2 per cent from the previous quarter and ahead of Mr. Bottomley’s $156.3-million projection.

“Aphria reported FQ2/21 financial results (ended November 2020) that that came in above our top-line forecasts, driven largely by initial shipments into Germany and its Israeli partner (Canndoc) during the period,” he said. “Although growth in its Canadian adult-use sales was more modest (at up 2.1 per cent quarter-over-quarter), we note that even prior to closing its proposed deal with Tilray, APHA still boasts the highest market share with respect to its domestic recreational penetration with a national market share of more than 13 per cent (or upwards of 20-per-cent proforma its deal for Tilray).”

After increased his target for Aphria shares to $17.50 from $11, exceeding the $11.85 consensus, Mr. Bottomley raised his rating to “speculative buy” from “hold.”

“Although the quarter came in generally as expected, we note that at the exchange ratio of 0.8381, APHA currently sits at a 22-per-cent discount to the implied deal price with TLRY,” he said. “With management noting during the FQ2 earnings call than it anticipates closing this transaction in late April or early May, we believe APHA could see continued near-term upside as it closes this gap should overall positive sentiment in the space remain intact.”

Elsewhere, Haywood Securities analyst Neal Gilmer downgraded Aphria to “hold” from “buy” with a $14 target, rising from $12.25.

“We continue to view Aphria as a leader in the Canadian LP landscape with exposure in the U.S. through the Sweetwater acquisition as well as international operations,” he said. “We have a positive view on the Tilray acquisition that should close in Q2/21. Our downgrade is reflective of the strong share price move and is not a reflection on the execution of management that established leading market share in Canadian cannabis as well as strategic acquisitions. It is clear that investors are allocating significant capital into Canadian cannabis operators and caution on the potential volatility in shares. While the momentum could continue to drive share price gains and create trading opportunities in the near-term, we are concerned the shares could get overextended without visibility on the U.S. opportunity.”

CIBC World Markets’ John Zamparo hiked his target to $18 from $12.50 with an “outperformer” rating.

“Although the cannabis space has surged, and has even accelerated the past few weeks, we expect the results of last week’s Senate run-offs to drive valuations even further,” Mr. Zamparo said. “For APHA, both its valuation versus peers and recent operational progress (9 per cent quarter-over-quarter cannabis revenue growth and 25-per-cent EBITDA growth) look compelling. The divergence between APHA and TLRY has caused some investors to question the proposed merger’s likelihood, but at the same time makes APHA look undervalued, as its implied value based on TLRY’s close is $19.60 per share. We still expect the deal to close as planned, likely in May.”


Believing the “stiffest macro/operational headwinds facing the company in 2020 are poised to become tailwinds in 2021,” Raymond James analyst Steve Hansen raised his rating for Chemtrade Logistics Income Fund (CHE.UN-T) to “outperform” from “market perform” on Friday.

“After a string of upbeat quarters in 2019, Chemtrade ran into a very difficult macro/operating environment in 2020 that crimped earnings (trailing 9-month EBITDA: down 16.8 per cent year-over-year) and ultimately forced the company to cut its dividend by 50 per cent,” he said. “While COVID-related economic damage was a driving force behind these pressures, we note they were further exacerbated by large operating turnarounds at a major regen customer and Chemtrade’s Electrochem plant in North Vancouver, both which occurred in 4Q20 and will be reflected in the firm’s upcoming quarterly print.”

“Fortunately, we believe the worst of the aforementioned challenges are now in the rear-view mirror. Specifically, we foresee a number of incremental tailwinds emerging in 2021 that bode well for Chemtrade’s earnings profile, including: 1) an improving North American economy; 2) rising sulphuric acid prices; 3) a modest lift/recovery in NE Asian caustic prices; 4) improving HCL demand/prices in tandem with higher oil prices and E&P activity; and 5) improved operating performance (less turnarounds, higher EC operating rate). Collectively, we expect these shifting dynamics to underpin a healthy EBITDA recovery in 2021 (& beyond).”

Seeing an “attractive” valuation, Mr. Hansen maintained a $9 target. The average on the Street is $7.03.

“Chemtrade still trades at a discounted valuation vs. its historical average, a discount that we expect will gradually erode as the aforementioned tailwinds gather momentum,” he said. “While the company continues to carry an above-average leverage profile (4.8 times TTM EBITDA), it has no nearterm maturities and plenty of room on its existing covenants to provide time for an earnings recovery. Coupled with the total return opportunity described, we are upgrading.”


After Raymond James raised its oil price deck to a “more optimistic” set of assumptions, equity analysts Chris Cox and Jeremy McCrea made a series of rating changes to stocks in their coverage universe.

“We have upwardly revised our ratings for a number of oil-weighted producers, which see a considerable improvement in their respective outlooks under the revised commodity price assumptions,” they said.

Changes included moving their 2021 WTI projection in line with forward prices to US$49.62 per barrel from US$40.70. The firm’s long-term assumption rose to US$55 from US$50.

Their rating changes were:

  • Baytex Energy Corp. (BTE-T) to “market perform” from “underperform” with a $1 target, up from 70 cents. The average on the Street is 87 cents.
  • Cardinal Energy Ltd. (CJ-T) to “market perform” from “underperform” with a 90-cent target, up from 25 cents. Average: 83 cents.
  • Vermilion Energy Inc. (VET-T) to “outperform” from “market perform” with an $8 target, up from $6. Average: $6.93.
  • Obsidian Energy Ltd. (OBE-T) to “market perform” from “underperform” with a $1 target, up from 5 cents. Average: 15 cents.
  • Pipestone Energy (PIPE-T) to “outperform” from “market perform” with a $1.25 target, up from $1. Average: $1.04.
  • Yangarra Resources Ltd. (YGR-T) to “outperform” from “market perform” with a $1.15 target, up from 80 cents. Average: 89 cents.
  • MEG Energy Corp. (MEG-T) to “outperform” from “market perform” with a $7.50 target, up from $4.50. Average: $5.27.

Their target price changes for pipeline and midsteam companies were:

  • Enbridge Inc. (ENB-T, “outperform”) to $50 from $49. Average: $51.23.
  • Gibson Energy Inc. (GEI-T, “market perform”) to $23 from $24. Average: $24.89.
  • Inter Pipeline Ltd. (IPL-T, “market perform”) to $15 from $14. Average: $14.64.
  • Keyera Corp. (KEY-T, “outperform”) to $28 from $25. Average: $26.89.
  • TC Energy Corp. (TRP-T, “outperform”) to $65 from $68. Average: $69.68.

The firm’s changes for senior oil and gas producers were:

  • Canadian Natural Resources Ltd. (CNQ-T, “outperform”) to $45 from $32. Average: $36.39.
  • Cenovus Energy Inc. (CVE-T, “market perform”) to $10 from $7.50. Average: $8.59.
  • Imperial Oil Ltd. (IMO-T, “market perform”) to $33 from $22. Average: $25.03.
  • Ovintiv Inc. (OVV-N/OVV-T, “market perform”) to US$21 from US$11. Average: US$16.12.
  • Suncor Energy Inc. (SU-T, “outperform”) to $32 from $22. Average: $28.52.


Strong agricultural fundamentals support a positive outlook for Nutrien Ltd. (NTR-N, NTR-T), according to RBC Dominion Securities analyst Andrew Wong.

“Global ag markets continued to tighten into 2021, driving crop prices to 6-year highs,” he said. “We believe higher crop prices have resulted in significantly improved farmer incomes and favourable affordability levels which should support demand growth in 2021. We forecast higher nitrogen prices in 2021 due to a higher cost curve supported by stronger energy prices. We expect potash markets to remain tight into 2021 as demand keeps pace with new capacity additions and inventories are kept in check.”

In a fourth-quarter earnings preview for the Saskatoon-based company, he said a “strong” fall application season is likely to bring momentum for Nutrien into 2021.

“The Retail segment benefited from strong fall applications, especially crop nutrient sales,” Mr. Wong said. “Nitrogen prices were higher in Q4/20 due to stronger demand and improved cost curve support. Potash prices were also higher due to strong demand, especially in the US due to a strong fall season - although potash costs were likely up quarter/quarter due to scheduled turnarounds.”

“We expect positive ag fundamentals and stronger potash prices to driver higher EBITDA in 2021. Higher U.S. farm profitability should support moderate organic growth in the Retail segment. Potash sales and prices support our view for higher realized prices and sales volumes, but higher nitrogen prices will likely be offset by higher natural gas costs.”

Pointing to better market conditions and improved free cash flow, Mr. Wong raised his 2021 and 2022 earnings per share projections to US$2.53 and US$2.72, respectively, from US$2.37 and US$2.71.

That led him to increase his target price for Nutrien shares to US$57 from US$55 with an “outperform” recommendation (unchanged). The average on the Street is US$52.54.

Elsewhere, Stifel analyst Vincent Anderson raised his target to US$61 from US$50 with a “buy” recommendation.


Seeing a “robust” demand for electric vehicles in 2021, Wedbush analyst Dan Ives thinks Tesla Inc. (TSLA-Q) is still “leading the pack” despite increasing competition.

“There has been a massive appetite in the market for EV stocks led by Tesla over the past year as the demand trajectory for the EV sector continues to move markedly higher,” he said in a research note. “The hearts and lungs of the Tesla bull thesis is centered around China as we have seen consumer demand skyrocket into 2021 not just for Model 3′s, but for impressive domestic competitors such as Nio, Xpeng, Li Auto and others in this key region. As such, we have significantly raised our forecasts in our Wedbush Tesla Delivery Model with our expectations that Tesla now exceeds the 1 million delivery threshold in 2022 and could start to approach 5 million deliveries annually by the end of the decade if global EV demand continues at this pace. We believe overall that EVs, which make up 3 per cent of global auto sales today, could reach 5 per cent by the end of 2021 and 10 per cent by 2025.”

“While there are 150+ auto makers aggressively going after the EV opportunity globally, right now in the EV market we believe it’s Tesla’s world and everyone else is paying rent. However, competition will be fierce within EV battery technology (GM and Nio in particular stand out) as this represents the key differentiator over time and remains a major focus area for Musk & Co. to maintain its formidable leadership position in the EV market. While growth will be key, its profitability profile will be under the microscope from investors going forward to better discern how quickly Tesla can ramp its margin structure, especially with higher margin sales coming out of China over the next few years. To this point, by 2022 we believe 40 per cent or more of Tesla’s overall delivery sales could come from China as this remains the main growth region going forward followed by Europe, then the US. We believe that the China growth story is worth at least $100 per share in a bull case to Tesla as this EV penetration is set to ramp significantly over the next 12 to 18 months, along with major battery innovations coming out of Giga 3.”

Mr. Ives thinks the EV market is “going to see tailwinds” with Joe Biden in the White House, adding: “A Blue Senate is very bullish and a potential ‘game changer’ for Tesla and the overall EV sector in the US, with a more green-driven agenda now certainly in the cards over the next few years,” he said. “We believe a doubling down on EV tax credits and further consumer incentives and government initiatives around the EV sector will be on the horizon which is a major positive for Tesla, GM, Rivian, Fisker, and other auto players/EV supply chain (QS, etc.). We believe while the impact of a Biden Administration taking the reigns in January (and a Blue Senate) will have wide reaching ramifications across all sectors, in particular the focus on environmental issues and reducing the domestic carbon footprint could have a dramatic impact for EV vehicles in the near-term.”

In order to reflect a “stronger” EV demand moving forward, Mr. Ives hiked his target for Tesla shares to a new Street-high of US$950 from US$715. He also established a new bull case target of US$1,250, up from US$1,000. The average is currently US$499.53.

Meanwhile, in a research note in which he reaffirmed General Motors Co. (GM-N) as his top pick in the U.S. auto sector, Citi analyst Itay Michaeli raised his Tesla target to US$159 from US$137, keeping a “buy” rating.

“We’re raising estimates to reflect stronger-than-expected Q4 deliveries, the recent capital raise and other inputs,” he said. “As a result, our price target rises to $159 from $137 on: (a) Updated bull/base/bear assumptions, including incorporating the company’s LT volume targets into our Bull case (albeit at much lower probability vs. our prior bull case that was based on lower volume), as well as modestly higher margins for our Base and Bear cases, reflecting Tesla’s ongoing progress, including in Q4; (b) With a now much higher Bull case ($881), we’ve revised our Bull/Base/Bear probabilities to 3 per cent/90 per cent/7 per cent -recall that our Base case incorporates 4.5 million units, $40k ASP and now a 16-per-cent margin. Collectively, these changes increase our price target. Heading into Q4, key data points we’re tracking include the Q4 auto ASPs/gross margin, 2021 delivery guidance (Citi now at 800k) and FSD Beta developments. As for the stock, we continue to think that current valuations reflect future expectations that are simply too high based on the data points we’re tracking (20 million units by 2030, L4 RoboTaxi leadership), or expectations that are available to other companies trading at a fraction of Tesla’s valuation (AV models, data/subscription revenue). So while Tesla is executing very well and does sport key advantages in the EV/Car of the Future race, we see better risk/reward opportunities elsewhere at these valuations.”


In a research note titled Teaching An Old Dog New Tricks, CIBC’s Dennis Fong initiated coverage of Cenovus Energy Inc. (CVE-T) with an “outperformer” recommendation.

“While the merger with Husky Energy (HSE) has provided Cenovus with a more disparate asset base, it has also transformed the company into a more balanced producer,” he said.” We expect the execution of cost synergies and balance sheet improvement to be of primary focus in the near term as a potential driver of unlocking value. We view CVE as a potential re-rate story, as it has high-quality upstream assets and significant torque to downstream margins as oil demand improves in a post-pandemic economic recovery

Seeing an “attractive” valuation, Mr. Fong set an $11 target, topping the $8.59 average.


“In a world of stretched EV valuations,” NFI Group Inc. (NFI-T) offers the “best risk/return profile,” according to Laurentian Bank Securities analyst Nauman Satti.

“Despite the recent stock rally following the investor day, we believe further multiple re-rating is possible given the trading discount from peers and potential triggers from green policy initiatives and stimulus packages resulting from the Democrats’ control of both the Senate and the House of Representatives,” said Mr. Satti.

Keeping a “buy” rating, he raised his target to $39 from $26. The average is xx

“In our December note, we had built a case for multiple re-rating and we believe there is room for further expansion from potential announcements of favorable green initiatives and the large gap between NFI’s valuation vs. EV plays,” the analyst said. “Our increase in multiple to 9.5 times reflects peak cycle NTM [next 12-month] multiple from early 2018 as we believe NFI has passed through its trough cycle in 2020 and will benefit from a secular policy changes and improvement in margins from operating leverage and cost curtailment efforts, albeit gradually.”


Echelon Capital Markets analyst Rob Goff initiated coverage of EQ Inc. (EQ-X), a Toronto-based provider of digital marketing services, with a “speculative buy” rating on Friday.

“We look for EQ’s Artificial Intelligence or AI-driven data analytics of consumer behaviour to quickly emerge as a differentiated enabler driving client strategy, proprietary marketing and advertising programs,” he said. “The Company’s AI capabilities position it as a leader in Canadian location-based analytics. EQ leverages its AI and Machine Learning (ML) with location-based data together with primary data to predict purchase intent and analyze audiences. EQ currently works primarily with marquee names across the Media, Telecom, Automotive, and Financial verticals where its data analytics curate target audiences for media buying initiatives with recent success as a tool for capital allocation and broader marketing strategy and competitor analysis. Its success is measured in superior client ROIs that have driven significant contract expansions and no churn amongst top clients. EQ’s data analytics drive media buying with 70 per cent of media buys integrated with data insights. Direct data profits exceed advertising profits exiting 2022.

“We believe the Company’s EV at $108.1-million significantly undervalues the revenue trajectory prospects leveraging EQ’s proprietary AI-powered data analytics.”

Mr. Goff set a $2.20 target, exceeding the $2 consensus.


In other analyst actions:

* National Bank Financial analyst Adam Shine upgraded Thomson Reuters Corp. (TRI-T, TRI-N) to “outperform” from “sector perform” with a $115 target, up from $111 and exceeding the $85.18 average.

* National Bank’s Michael Robertson raised Pason Systems Inc. (PSI-T) to “outperform” from “sector perform” with a $10.50 target, rising from $7.50. The average is $8.50.

* National Bank’s Maxim Sytchev resumed coverage of WSP Global Inc. (WSP-T) with an “outperform” rating and $133 target, topping the $125.08 average.

* Jefferies analyst David Steinberg increased his target for Bausch Health Companies Inc. (BHC-N, BHC-T) to US$33 from US$27 with a “buy” recommendation. The average is US$28.11.

* Piper Sandler analyst Nicole Miller Regan raised her target for Restaurant Brands International Inc. (QSR-N, QSR-T) to US$71 from US$65 with an “overweight” rating, while BMO Nesbitt Burns’ Peter Sklar raised his target to US$70 from US$65 with an “outperform” recommendation. The average on the Street is US$66.23.

* RBC Dominion Securities analyst Alexander Jackson increased his Russel Metals Inc. (RUS-T) to $25 from $22 with an “outperform” rating. The current average is $22.07.

* CIBC World Markets analyst Mark Petrie raised his target for Aritzia Inc. (ATZ-T) to $31 from $26, maintaining an “outperformer” rating. The average is $30.81.

“Aritzia’s strong results in a tough environment demonstrate its relevance with consumers and deft management,” he said. “Sales grew, profits barely dropped, and cash flows surged as e-commerce sustained and store productivity improved. We believe on-trend product, broadening assortment, improving digital experience, and whitespace in the U.S. should allow e-commerce to build off this higher base. Store economics and network growth potential remain robust. Net, we believe Aritzia is well-positioned to reach new heights on the other side of COVID.”

* Needham analyst Scott Berg raised his target for Absolute Software Corp. (ABST-Q, ABST-T) to US$18 from US$14, which is the current consensus, with a “buy” rating.

* BMO Nesbitt Burns analyst Thanos Moschopoulos raised his target for Lightspeed POS Inc. (LSPD-N, LSPD-T) to $85 (Canadian) from $80 with an “outperform” rating, while KeyBanc’s John Beck raised his target to US$85 from US$50 with an “overweight” recommendation. The average is $78.34 (Canadian).

* Mr. Beck also raised his target for Shopify Inc. (SHOP-N, SHOP-T) to US$1,350 from US$1,300 with an “overweight” rating. The average is currently US$1,146.98.

* BMO’s Ben Pham raised his target for Capital Power Corp. (CPX-T) to $38 from $33, exceeding the $36.27 average. He kept a “market perform” rating.

* BMO’s Ryan Thompson trimmed his target for Torex Gold Resources Inc. (TXG-T) to $35 from $36 with an “outperform” recommendation. The average is $34.

* BMO’s Brian Quast lowered his Eldorado Gold Corp. (ELD-T) target to $20 from $22 with an “outperform” rating. The average is $20.37.

* TD Securities analyst Cherilyn Radbourne cut her target for Ritchie Bros. Auctioneers Inc. (RBA-N, RBA-T) to US$68 from US$80 with a “hold” recommendation. The average is currently US$73.04.

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