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

After the release of “solid” fourth-quarter 2021 results and stronger-than-expected guidance, Desjardins Securities analyst Benoit Poirier sees BRP Inc. (DOO-T) on track to deliver its fiscal 2025 strategic objective by 2022, saying it’s “an impressive achievement, although management is not stopping there.”

Before the bell on Thursday, the Quebec-based recreational vehicle maker reported revenue of $1.815-billion, up 12 per cent year-over-year and exceeding the forecast of both Mr. Poirier ($1.718-billion) and the Street ($1.796-billion). Normalized fully diluted earnings per share of $1.82 also topped expectations ($1.62 and $1.70, respectively).

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BRP also introduced EPS guidance for its current fiscal year (2022) of $7.25 to $8, up from $5.39 in 2021 and well above both Mr. Poirier’s $5.79 estimate and the consensus of $5.85.

“Such performance would imply that BRP achieves its FY25 strategic plan target of normalized EPS of $7.50 three years in advance — an impressive achievement,” said the analyst. “That being said, management noted that there are still plenty of growth opportunities and levers to unlock value beyond FY22 even if retail sales moderate: (1) expanding its market share in the SSV and ATV segments; (2) growing the marine business with Project M and Project Ghost; (3) unlocking $300-million of lean value through cost and process optimization; and (4) higher absorption of fixed costs from volume growth. Management noted that the anticipated moderation of retail sales in 2Q is not due to a lack of demand, but rather a lack of inventory. Recall that management’s FY25 strategic plan did not incorporate the current level of new entrants into the industry or any share buybacks (where management has been particularly active recently), and it also assumed a normal level of promotional activity.

“Overall, while we remain conservative for FY23, we are confident that management should be able to deliver further growth beyond the impressive performance expected in FY22, especially given ongoing inventory replenishment efforts. For FY23, we forecast revenue of $7.7-billion (up 3 per cent year-over-year), normalized EBITDA margin of 16.8 per cent (up 40 basis points year-over-year) and normalized EPS of $7.84 (up 7 per cent year-over-year). Management intends to update its FY25 strategic targets once market conditions stabilize.”

In response to raising his revenue and earnings projections for fiscal 2022 based on the results and guidance, Mr. Poirier hiked his target for BRP shares to $131 from $107, keeping a “buy” recommendation. The average target on the Street is $107.09, according to Refinitiv data.

“We believe management could deploy $500-million toward a substantial issuer bid to unlock further shareholder value (we estimate $8 per share) while still maintaining a healthy balance sheet (we derive a leverage ratio of 1.4 times),” he said.

Conversely, TD Securities analyst Brian Morrison cut BRP to “buy” from “action list buy” with a $120 target, up from $105.

Other analysts raising their targets on Friday include:

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* Canaccord Genuity’s Derek Dley to $120 from $105 with a “buy” rating.

“In our view, BRP is well positioned to capture additional market share in a growing powersports market, as it continues to introduce new products, and extends its reach into complementary product lines,” said Mr. Dley.

* CIBC World Markets’ Mark Petrie to $117 from $100 with a “neutral” rating.

“BRP has undoubtedly benefitted from the consumer shifts underway in the pandemic,” he said. “We believe tailwinds will persist in FY22 and be supported by a constrained competitive landscape. The company also has several organic growth initiatives that were in place before the pandemic to support growth into FY23 and beyond. However, current margins are boosted materially by the favourable backdrop, and we are cautious about projecting this out too far given the significant growth of FY21 and FY22.”

* National Bank’s Cameron Doerksen to $123 from $102 with an “outperform” rating.

* BMO Nesbitt Burns’ Gerrick Johnson to $98 from $74 with a “market perform” rating.

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Tamarack Valley Energy Ltd.’s (TVE-T) recent exploration in Alberta’s Clearwater oil play is not being properly recognized by the market, according to Raymond James analyst Jeremy McCrea, prompting him to upgrade his rating to “strong buy” from “outperform.”

“While investors have been pushing E&P share prices higher on expectations of stronger WTI , there remains a few names that we expect to also see a multiple expansion (and not just a reversion to the mean),” he said. “Historically, where we typically see the largest multiple expansions in the sector is when a company discovers a new play/formation, especially in a resource play where there remains plenty of running room (as investors price in this future undrilled inventory).

“Recall in December, Tamarack announced two acquisitions and its entry into the Clearwater play with combined production of 2.0 mboe/d (for $90-million). On March 25, TVE closed two more acquisitions totaling 2.8 mboe/d for $135-million in the Sparky (Eyehill), Slavepoint and Clearwater plays. The standard headline figure of 3.9x FFO was ‘good’ but not ‘good enough’ to get the attention by the market given that the acquisition was announced in the middle of Q4 reporting. Combined with no GeoSCOUT production data from the wells in the acquired asset (and the company restricted from discussing details of the play), we believe the value of the acquired acreage appears to have been greatly overlooked.”

Mr. McCrea raised his target for the Calgary-based company by $1 to $3.50. The average on the Street is $2.94.

“TVE has potentially come across a top decile asset with years of running room based on recent and early exploration results. A few more months of data will likely confirm this, which we expect will lead TVE expanding its capex and production guidance later this year. With D/EBITDA at 0.7 times, EV/FCF yield at 19 per cent, EV/PDP at 1.4 times and a much improved profitability outlook with the Clearwater asset, we believe there’s plenty of upside not appreciated by the market yet. Given all of this we are upgrading.”

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Other analysts make target adjustments include:

* CIBC’s David Popowich to $2.75 from $2.50 with an “outperformer” rating.

“In our view, the acquisitions that closed today are very consistent with Tamarack Valley’s operational strategy, which focuses on low-decline, quickpayback oil assets” said Mr. Popowich. “The company has clearly positioned itself as a consolidator in the current industry landscape, and considering its clean balance sheet and strong free cash flow visibility, we would not be surprised to see Tamarack Valley continue to capitalize on opportunistic M&A as it presents itself.

“With a free cash flow yield of more than 23 per cent, combined with production growth visibility of more than 5 per cent per year, we continue to believe Tamarack Valley stacks up very well in the Canadian SMID-cap peer group, and look for the valuation to expand as the company integrates these acquisitions.”

* ATB Capital Markets’ Patrick O’Rourke to $3 from $2.50 with an “outperform” rating

* BMO Nesbitt Burns’ Ray Kwan rto $2.75 from $2.25 with a “market perform” rating.

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In response to an 11-per-cent share price decline since its March 18 close, Beacon Securities analyst Russell Stanley raised his rating for Green Thumb Industries Inc. (GTII-CN) to “buy” from “hold.”

“We view GTII as one of the premier companies in the cannabis space, and our prior downgrade was based solely on valuation,” he said. “The company recently reported Q4 results that beat our forecast/consensus, with EBITDA margins improving to 37 per cent, and operating cash flow margins (before working capital) expanding to 23 per cent. Given its strong cash flow profile, we estimate that GTII has $240-million in ‘dry powder’ available for possible M&A activity. With further upside now available to investors relative to our price target, we are reinstating our Buy rating.”

Believing the Chicago-based company’s stock deserves to trade at a premium to its peers, Mr. Stanley maintained a $46 target, which sits below the current consensus of $57.01.

“The stock now trades at 16 times our F2022 EBITDA forecast of $452-million (a shade higher than consensus at $448-million), representing a 12-per-cent premium to the 14 times average at which U.S. operators trade,” he said. “Given GTII’s strong track record on organic growth, EBITDA margins and cash flow production, we continue to believe it deserves a premium multiple of 18.5 times that EBITDA forecast. Potential catalysts include progress towards the issuing of additional retail licenses in Illinois, the Q1 results in May, and additional buildout updates.”

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A better-than-expected fourth quarter “finishes a tumultuous 2020” for Bitfarms Ltd. (BITF-X), according to HC Wainwright analyst Kevin Dede, who sees a “clearer path to profitability” for the Toronto-based blockchain infrastructure company.

On Thursday, Bitfarms reported revenue of $11.3-million, up 67 per cent quarter-over-quarter and ahead of Mr. Dede’s $9.4-million due to miner additions and the benefits of the start of the spike in bitcoin prices.

“The December quarter carried an approximate $16,000 average bitcoin price, but bitcoin had a volatile ride most of the year dipping as low as $5,300 in late March in sympathy with financial asset declines at the onset of the pandemic,” the analyst said. “While a strong bitcoin price, currently in the $51,000 range, positions miners favorably, we see Bitfarms’ infrastructure build as the real takeaway message for the quarter. Operating roughly 69MW in five facilities in Quebec, Canada, Bitfarms is working to add 80MW of power in two Quebec facilities this year, but still potentially short of our estimated 150MW requirement to power the 48,000 miners ordered from MicroBT.

“Our point is to emphasize Bitfarms’ growth track: 3,000 received and installed miners in 4Q20 while 5,865 were received and installed full-year last year. Beyond the obvious, Bitfarms has strengthened its relationship with Hydro-Quebec, potentially leading to opening another Quebec facility in an abandoned pulp and paper or (rock and dirt) mining facility that has existing high-power supply infrastructure. Meanwhile, Bitfarms’ hash rate has already expanded to 1.2 EH/s this year up from 965 at year-end. We expect the company to add at least 2,200 more computers this year, and have forecast Bitfarms’ hash rate at roughly 1.4 EH/s by year-end. As referenced, the bigger growth surge comes next year with the installation of 48,000 MicroBT machines, most of which should fill out Quebec locations currently being outfitted with transformers necessary to power mining computers.”

With the rise in bitcoin pricing, Mr. Dede raised his 2021 sales and earnings expectations, leading him to raise his target for Bitfarms shares to $8 from $6 with a “buy” rating (unchanged).

“We are bumping up our price target ... based on recent trading action that has Bitfarms’ stock reaching highs above the $9 range while reflecting our own sales and earnings estimate increase presented with this note,” he said. “Further too, we continue to see Bitfarms undervalued ... that we suspect has not yet found equilibrium with regard to mining competitors. Our new target backs up against a 27 times P/E multiple on our new 30-cent EPS estimate for 2021. We see a fat multiple compared to the current S&P 500 in the 25 times range as fair with respect to the growth and listing initiatives Bitfarms now has underway: (1) 48,000 machines are expected to be delivered by MicroBT in 2021; (2) access to an additional 79MW of power in Quebec and the significant potential for additional power; (3) Bitfarms’ mining efficiency as noted in the breakeven price of $5,600 recognized last year; (4) application for listing on Nasdaq; and (5) improving investor awareness as a leading North American bitcoin miner.”

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In a research report titled The turnaround story of 2020, the growth story of 2021, Desjardins Securities analyst David Stewart initiated coverage of Karora Resources Inc. (KRR-T) with a “buy” recommendation.

“KRR employs a hub-and-spoke model to feed its Higginsville process plant from surrounding open pit and underground deposits in Western Australia, one of the world’s most mining-friendly jurisdictions,” he said. “The current management team has completely turned around the company from owning one mine (Beta Hunt) and no mill in early 2019 to now owning the 4,000tpd Higginsville process plant and a plethora of surrounding deposits. Annual gold production has grown to more than 100koz while AISC [all-in sustained costs] has steadily declined, and with new sources such as Spargos being developed in the near term, we expect continued growth exceeding 150kozpa over the next few years.

“Further production growth should manifest from additional resource expansions and new discoveries. Having reduced the formerly onerous royalties across its portfolio to more reasonable levels, KRR has effectively unlocked the full potential of its vast underexplored claims in a well-endowed gold district.”

Seeing the potential for “significant” net asset value growth as deposits are discovered and grow, Mr. Stewart set a $5.90 target for Karora shares. The average on the Street is $6.43.

“KRR’s management team has been extremely active in unlocking value on its large property package. With the formerly onerous royalties negotiated to more reasonable levels last year, KRR’s hub-and-spoke model is primed for drill-to-mill value creation as the company continues to identify and grow resources on its historically underexplored claims. We expect attractive growth in resources, reserves, production and, ultimately, NAVPS [net asset value per share],” he said.

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After its fourth-quarter results fell in-line with expectations and seeing improved market fundamentals, a group of equity analysts raised their targets for shares of Savaria Corp. (SIS-T), a Laval, Que.-based accessibility and patient handling company on Friday.

“Savaria continued to post solid results in the context of the COVID-19 pandemic,” said Desjardins Securities’ Frederic Tremblay. “We anticipate an exciting 2021 and 2022 with Savaria’s performance lifting to new heights, thanks to the recently completed transformative acquisition of Handicare and the dissipating COVID-19 headwinds. Overall, we believe Savaria is in a stronger position than ever in its history to meet the needs of an aging population.”

Keeping a “buy” recommendation for Savaria shares, Mr. Tremblay bumped up his target to $22 from $21.50. The average is $20.63.

Others making changes include:

* Scotia’s Michael Doumet to $20.50 from $20 with a “sector outperform” rating.

* TD Securities’ Derek Lessard raised his target to $23 from $22 with a “buy” rating.

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In other analyst actions:

* TD Securities analyst Sean Steuart upgraded West Fraser Timber Co. Ltd. (WFG-N, WFG-T) to “action list buy” from “buy” with a US$95 target, up from US$91 and above the US$90.60 average.

* BMO Nesbitt Burns analyst Jenny Ma downgraded Invesque Inc. (IVQ.U-T, IVQ-T) to “market perform” from “outperform” with a $2.50 target, down from $2.75. The average on the Street is $2.68.

* TD Securities Aaron MacNeil downgraded Xebec Adsorption Inc. (XBC-T) to “speculative buy” to “buy” with a $7.50 target, down from $10. Canaccord Genuity analyst Yuri Lynk cut his target to $4.50 from $6 with a “hold” rating, while Desjardins Securities’ Frederic Tremblay lowered his target by a loonie to $6.50 with a “buy” recommendation. The average is $6.78.

“Following a challenging 2020, Xebec intends to pull various levers in 2021 to improve and derisk the business, reap the benefits of recent M&A and, importantly, rebuild credibility with investors,” said Mr. Tremblay. “While XBC has become a ‘show me’ story and the road ahead may be bumpy, we are comfortable with the fundamentals in its end markets, recent M&A activity and changes in the renewable natural gas (RNG) equipment business. We believe patient investors should be rewarded if execution improves.”

* After changing his valuation approach following the announcement it is expanding its reportable segment disclosures, Canaccord Genuity analyst Scott Chan hiked his target for IGM Financial (IGM-T) to $44 from $39.50 with a “buy” rating. The average is $39.88.

“With the firm’s solid assets and net flow traction, and potential for above-average EPS growth, we believe IGM shares deserve a premium valuation relative to peers,” he said. “Further, IGM pays a 5.7-per-cent dividend yield, implying a total RoR of approximately 18 per cent.”

* CIBC World Markets analyst Kevin Chiang raised his Canadian National Railway Co. (CNR-T) target to $148 from $142 with a “neutral” recommendation. The average is $132.75.

“We hosted CN for a group chat and with us from the company were Rob Reilly, EVP & COO, and Paul Butcher, VP Investor Relations. The main takeaway from our discussion is that the company’s volume outlook remains robust, the network is running well, and the rail remains a leader in technology and ESG,” said Mr. Chiang.

* Canaccord Genuity analyst Brendon Abrams raised his target for PRO Real Estate Investment Trust (PRV.UN-T) to $6.75 from $6.25, keeping a “buy” rating. The average is $6.45.

“In our view, the REIT is well-positioned going forward given its limited lease maturities in 2021, a well-covered distribution (attributable, in part, to a cut in early 2020), and increased exposure to the industrial and mixed-use commercial asset classes where fundamentals are strong. Combined, we believe this represents a compelling investment on a risk-reward basis at the current unit price, and we continue to rate PRO a BUY,” he said.

* Mr. Abrams also increased his Inovalis Real Estate Investment Trust (INO.UN-T) target to $10.75 from $9.50 with a “buy” recommendation. The average is $9.69.

* Raymond James analyst Bryan Fast increased his target for shares of Blackline Safety Corp. (BLN-X) to $10.50 from $10, maintaining an “outperform” rating. The average is $11.25.

“Blackline continued to navigate a shifting operating environment,” he said. “In fact, year-over-year revenue growth has remained intact throughout the pandemic. Sales growth is still the key measure of success as the company quickly tries to build scale, create a network-effect, and capitalize on its firstmover advantage. Looking forward, we are forecasting a resumption of high double digit revenue growth in 2021, but note that uncertainty regarding the duration and magnitude of the COVID-19 pandemic has much of our forecasted sales growth weighted to the back half of 2021.”

* Scotia Capital analyst Himanshu Gupta raised his target for Automotive Properties REIT (APR.UN-T) to $12 from $11.50, keeping a “sector outperform” rating. The average target is $11.95.

* Credit Suisse analyst Andrew Kuske raised his Brookfield Business Partners LP (BBU-N, BBU.UN-T) to US$50 from US$46 with an “outperform” rating. The average is US$48.14.

* TD Securities analyst Brian Morrison increased his target for Aimia Inc. (AIM-T) to $6.50 from $6, maintaining a “buy” rating. The average is $7.

* ATB Capital Markets analyst Kenric Tyghe raised his Cresco Labs Inc. (CL-CN) target by a loonie to $22 with an “outperform” rating. The average is currently $22.36.

* National Bank analyst Maxim Sytchev started ABC Technologies Holdings Inc. (ABCT-T) with a “sector perform” rating and $11.50 target, exceeding the $9.91 average.

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