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

RBC Dominion Securities’ Paul Treiber expects Shopify Inc. (SHOP-N, SHOP-T) to beat the Street’s expectations when it reports second-quarter financial results on July 28.

In a research report released Friday, the equity analyst raised his financial projections for the Ottawa-based technology giant, citing “resilient eCommerce sales and solid new merchant adds.”

“BuiltWith data shows continued strong merchant growth at Shopify, which in our view is a leading indicator of Shopify’s long-term momentum,” Mr. Treiber said. “Regarding Q2, we believe Shopify will report revenue and GMV above consensus estimates, which assume overly conservative sequential deceleration in growth.”

For the second quarter, the analyst is now estimating GMV growth of 40 per cent year-over-year. Quarter-over-quarter, he’s projecting a rise of 13 per cent, which falls below the pre-COVID second-quarter average of 17-per-cent growth.

“We believe our outlook for GMV Q/Q growth to slow 400 basis points reasonable in light of U.S. Census data showing non-store sales (e.g. eCommerce) slowed 320 bps, whereas Shopify should benefit from International (faster growing) and strong new merchant adds,” he said. “We anticipate take rate is effectively flat (up 1 bps Q/Q) at 1.80 per cent and we forecast MRR to rise 6 per cent Q/Q to $95.6-million on new merchant adds.”

Overall, he’s now estimating revenue of US$1.097-billion for the quarter, exceeding the Street’s view of US$1.04-billion. EBITDA of US$115-million and earnings per share of US$1.03 also top the consensus estimates of US$115-million and 97 US cents.

Concurrently, Mr. Treiber raised his full-year 2021, 2022 and 2023 revenue projections to US$4.69-billion, US$6.43-billion, and US$8.37-billion, respectively, from US$4.17-billion, US$5.63-billion, and US$7.70-billion previously. For adjusted EPS, he’s now expecting US$4.36, US$4.46, and US$6.65, increasing from US$3.70, US$3.05, and US$5.44.

With those changes, the analyst hiked his target for Shopify shares to US$1,800 from US$1,700, reiterating an “outperform” rating. The average is US$1,552.59, according to Refinitiv data.

“Shopify’s shares have rallied 24 per cent since Q1 results (vs. S&P500 up 4 per cent),” he said. “We believe the rally reflects improving investor sentiment that Shopify’s growth in the near-term would decelerate less than feared and greater confidence in Shopify’s long-term opportunity. While return to on-premise is a potential risk to eCommerce adoption, it appears there is growing support for hybrid work environments post-pandemic. Hybrid, in our view, eliminates much of the friction around eCommerce, and may be a catalyst for greater eCommerce adoption going forward.”


IA Capital Markets analyst Neil Linsdell thinks EnWave Corp. (ENW-X) has “come through the worst of the storm” after losing a key contract with Costco Wholesale Corp. (COST-Q) and now sits poised to “rebuild quickly to profitability and significant revenue growth over the next few quarters.”

Accordingly, citing a pullback in price since he downgraded its shares following the release of its second-quarter earnings at the end of May, he raised his recommendation for the Vancouver-based advanced technology company to “buy” from “hold.”

“After the FQ2 results, we slashed our target price and downgraded to Hold after it became clear that EnWave’s sales into Costco had effectively ceased,” said Mr. Linsdell. “Now, with a new CEO being appointed at NutraDried, a scaled back operation and more focus on clearer wins and product development, we are satisfied that Moon Cheese sales have essentially bottomed out and will rebuild from this point forward, with a new Protein Blitz Mix product and growing distribution beyond its current 25,000 retail points of sale.”

“We remain confident in the Company achieving its targets of twelve small-scale and five large-scale machine sales this fiscal year as we are expecting another two 100kW unit sales in the next couple of months. Although sales efforts were hampered by the pandemic and travel restrictions, EnWave continued to sell and deliver new units that will also lead to an increase in royalty revenue as more products are commercialized. As we see more repeat orders from existing clients and more traction with U.S. cannabis companies and US Army suppliers, we expect momentum to further build in F2022.”

Ahead of the release of its third-quarter results on Aug. 26, the analyst is projected revenue of $4.8-million, relatively flat quarter-over-quarter, with an EBITDA loss shrinking to $1.3-million “as restructuring and cost savings initiatives start to show benefits.”

He maintained a target for Enwave shares of $1.10. The current average is $1.15.


Supply chain disruptions are “likely to put a kink” in NFI Group Inc.’s (NFI-T) earnings this year, according to Stifel analyst Maggie MacDougall.

That led her to downgrade its shares to “hold” from “buy” ahead of the Aug. 4 release of its second-quarter results.

“While we expect a 72-per-cent Q2/21 year-over-year revenue recovery given widespread shut-downs during the Q2/20 COVID lockdown period, we believe that the recovery during the quarter and this year may be softer than current consensus expectations for Q2 and Q3/20 because supply chain issues are likely to disrupt NFI’s production ramp and introduce cost inflation,” said Ms. MacDougall. “Earlier this week, commercial truck, bus, construction equipment and engine maker Volvo reported Q2 results that were impacted by the global shortage of semiconductors, which introduced production stoppages. In reference to the impact of supply chain issues, Volvo Chief Executive Officer Martin Lundstedt said in a statement, ‘There will be further disruptions and stoppages in both truck production and other parts of the group in the second half of the year.’”

The analyst made the rating change despite NFI announcing two “meaningful” orders this week with The National Transport Authority of Ireland and the North County Transit District in North San Diego County, California.

“Long term, NFI Forward will transform NFI into a fully integrated global operating company, resulting in $67-million in cost savings and adding $10-million in FCF annually,” she said. “Combined with a cyclical recovery, we expect 175 per cent adjusted EBITDA growth by 2025. Additionally, given NFIs dominant position in the North American and UK zero-emission bus (ZEB) markets, as well as the fact that it has the only fulsome ZEB offering that is Buy America compliant, we expect NFI to benefit from the shift to carbon-neutral public transit over the coming years. However, supply chain disruptions present challenges to upcoming financial results, introducing risk of earnings missing guidance this year. Thus, we are on the sidelines for now, waiting for a better entry point on the stock or a resolution of supply chain issues.”

Ms. MacDougall’s target for NFI shares fell to $27.50 from $36. The average on the Street is $32.94.


A group of analysts on the Street reduced their targets for Iamgold Corp. (IMG-T) after it lowered its full-year production outlook, citing lower output at its Westwood and Rosebel mines, on Thursday.

Shares of the Toronto-based miner dropped 10.5 per cent in response to the premarket announcement.

Those making adjustments include:

* BMO Nesbitt Burns’ Jackie Przybylowski to $3.50 from $4 with a “market perform” rating. The average is $4.48.

“IAMGOLD’s Q2 production results and updated guidance were negative versus our estimates as challenges across operations persist,” she said. “The Côté project update also shows a significant 28-per-cent bump in total capital costs versus the July 2020 estimate, but positively it does not consider a change to the development schedule. We have adjusted our estimates to reflect reported actual Q2 production results and guidance, and our one-year target is cut.”

* CIBC’s Anita Soni to US$3.50 from US$4 with a “neutral” rating.

“We view the recent updates as a negative for the stock with the higher capex driven by the Cote Gold construction increasing the risk around the company’s liquidity,” she said.

* Stifel’s Ingrid Rico to $4.50 from $4.75 with a “hold” rating.

* TD Securities’ Steven Green to $6 from $7.50 with a “buy” rating.

* Raymond James’ Farooq Hamed to US3.50 from US$4 with a “market perform” rating.

* Canaccord Genuity’s Carey MacRury to US$3.75 from US$4.50 with a “hold” rating.


Following Thursday’s release of in-line quarterly results, several analysts raised their target prices for units of Choice Properties Real Estate Investment Trust (CHP.UN-T).

Those making changes include:

* BMO Nesbitt Burns’ Jenny Ma to $15.25 from $14.50 with a “market perform” rating. The average is $15.25.

“Thematically, CHP.UN’s results are consistent with our view that Q2/21 should be a buoyant quarter for the REITs as they lap a trough Q2/20, which took the biggest hit from the pandemic,” she said. “We expect to see strong year-over-year growth in cash flow/unit and SPNOI for the Canadian REIT sector this quarter.”

* CIBC World Markets’ Sumayya Syed to $15.25 from $14.25 with a “neutral” rating.

“Despite a relatively small industrial footprint, NAV/unit grew 3.6 per cent from strong fundamentals and heightened buyer demand,” she said. “Following the fair value gain and debt repayment, leverage at 41 per cent is now the lowest amongst peers. In the near- to mid-term we expect modest but steady growth on the back of built-in rent growth in retail and industrial, and an improvement in office from resumption of parking revenue. The long-term growth profile continues to become more robust with the addition of two major mixed-use developments to the pipeline, with a targeted density ratio of 5 times.”

* Canaccord Genuity’s Mark Rothschild to $16 from $15.50 with a “buy” rating.

* RBC Dominion Securities’ Pammi Bir to $15.50 from $14.50 with a “sector perform” rating.


In response to a stronger-than-anticipated outlook, the Street applauded Precision Drilling Corp. (PD-T) on Friday.

Those raising their targets for its shares include:

* ATB Capital Markets’ Waqar Syed to $80 from $77 with an “outperform” rating. The average on the Street is $56.46.

“With improving activity, prices, and its Alpha suite of technologies contributing to revenue, PD should be an FCF machine,” said Mr. Syed. “Over 2021-2023, we project that PD will generate total FCF of $531-million. The Company continues to pay down debt ($52-million year-to-date), and should safely meet its target of $800-million in total debt reduction over the five-year period ending in 2022. By this point, we project that PD’s net debt to EBTIDA will be 2.5 times, and decreasing to 1.9 times by Q2/23e – we think this is a key threshold for PD and it could potentially bring back its dividend at that point. "

* Evercore’s James West to $70 from $69 with an “outperform” rating.

* RBC Dominion Securities’ Keith Mackey to $65 from $62 with an “outperform” rating.


Ahead of second-quarter earnings season for Canadian diversified financial firms, RBC Dominion Securities analyst Geoffrey Kwan named Element Fleet Management Corp. (EFN-T) as his top investment idea, believing it “should be a core holding in any portfolio.”

“EFN remains our most topical stock with investors, with investor focus on the origination outlook and new customer win progress,” he said.

In a research report released Friday, he touted the Toronto-based company’s “attractive blend of: (1) growth; (2) defensive attributes; (3) high FCF funding growth and significant returns of capital; and (4) attractive valuation (13.5 times P/E, 9.5-per-cent FCF yield on 2022). We think EFN is a rare mid- to large-cap growth story within Canadian Financials (we forecast a more than 15-per-cent EPS CAGR through 2025) that remains attractively valued.”

He maintained an “outperform” rating and $19 target for Element Fleet shares. The average is currently $16.93.

Mr. Kwan did raise his target price for his No. 2 idea Onex Corp. (ONEX-T, “outperform”) to $118 from $112, topping the average of $103.52.

“We think the shares are mispriced at a 12-per-cent discount to NAV (we think it should trade at or a slight premium to NAV), yet is delivering historical high Hard NAV growth and we think monetizations are likely in the near-term and should surface value,” he said.

He named Brookfield Business Partners LP (BBU-N, BBU.UN-T, “outperform” rating and a US$61 target, rising from US$60) and Home Capital Group Inc. (HCG-T, “outperform” and a target of $47, up from $45) his third best ideas.

“BBU trades at an 11-per-cent discount to NAV despite having positive fundamentals and we think monetizations are likely in the near-term and should surface value,” said Mr. Kwan. “HCG could return a substantial amount of excess capital (approximately $10 per share) when OSFI lifts its ban on share buybacks/dividend increases for banks/insurers. Furthermore, fundamentals are positive, yet HCG trades at 1.1 times P/BV despite a 13-per-cent ROE, which capital optimization could increase by 400-500 basis points.”

He also made these target changes:

  • First National Financial Corp. (FN-T, “sector perform”) to $52 from $53. Average: $53.40.
  • Brookfield Asset Management Inc. (BAM-N, BAM.A-T, “outperform”) to US$59 from US$55. Average: US$56.52.
  • Equitable Group Inc. (EQB-T, “outperform”) to $161 from $169. Average: $165.25.
  • ECN Capital Corp. (ECN-T, “outperform”) to $12 from $11. Average: $10.60.
  • Power Corporation of Canada (POW-T, “sector perform”) to $44 from $40. Average: $42.13.
  • Intact Financial Corp. (IFC-T, “outperform”) to $196 from $190. Average: $188.72.
  • CI Financial Corp. (CIX-T, “outperform”) to $26 from $25. Average: $25.94.
  • TMX Group Ltd. (X-T, “sector perform”) to $158 from $152. Average: $151.57.
  • IGM Financial Inc. (IGM-T, “sector perform”) to $52 from $51. Average: $49.67.
  • Sprott Inc. (SII-T, “sector perform”) to $54 from $58. Average: $53.82.

“We expect the mortgage companies (HCG, EQB, FN) to report another quarter of very strong originations and low loan loss provisions and look to insights regarding future housing activity. We see attractive value in our private equity coverage (ONEX, BBU, AD) with improving asset values and increasing M&A/monetization activity being at odds with the wide discounts to NAV. Finally, mutual fund industry net sales are accelerating and we focus on net sales outlook insights and signs of improving earnings,” he said.


CGI Inc. (GIB.A-T) is “well-positioned to benefit from digital transformation tailwinds,” said Desjardins Securities analyst Kevin Krishnaratne ahead of the July 28 release of its third-quarter financial results.

“We look forward to a return to revenue growth, continued EBIT margin expansion and positive commentary on trends to close out the year given momentum in the IT services industry, as has been recently reported by many peers,” he said.

Mr. Krishnaratne estimates the Montreal-based form will report revenue of $3.01-billion for the quarter, up 3.4 per cent year-over-year a constant-currency basis and reversing recent declines (1.7 per cent in the second quarter and 3.6 per cent in the first quarter).

“We expect adjusted EBIT of $480-million for a margin of 15.9 per cent, reflecting slight margin expansion from 15.8 per cent in 2Q as CGI’s revenue mix skews further toward higher-margin managed services and increases its mix of IP,” he said. “One area to watch is the potential for rising tech talent costs, which many in the industry, including CGI on its last earnings call, have recently discussed. Given CGI’s strong cash flow profile (we expect $452-million in CFO in 3Q), estimated cash balance of $1.4-billion and $1.5-billion revolver, the company is well-positioned to execute on its build-and-buy strategy as it looks to double its business over the next 5–7 years.”

Though he trimmed his full-year 2021 earnings and revenue projections, Mr. Krishnaratne hiked his target for CGI shares to $130 from $120. The average on the Street is currently $120.87.

“CGI shares are up 13 per cent year-to-date but are roughly flat from pre-pandemic highs (January 2020),” he said. “Recent industry commentary suggests continued momentum in the IT services space, with recent earnings for global peers and tech vendors ahead of Street estimates. With the stock now trading at 11.5 times calendar 2022 EBITDA vs peers at 10.5 times (12.5 times ex outliers) and Accenture at 17.0 times, we see a unique buying opportunity for a leading SI well-aligned to capitalize on digital transformation trends globally.”

Elsewhere, BMO Nesbitt Burns’ Thanos Moschopoulos raised his target to $128 from $121 with an “outperform” recommendation.

“We believe that CGI is benefiting from a healthy IT services spending environment, as verticals/geographies that were challenged during the pandemic have been recovering, and as clients have been ramping up investment in new initiatives (e.g., digital transformation and migration to the cloud),” said Mr. Moschopoulos. “We believe Q3/21 will demonstrate a return to year-over-year organic growth and view the stock’s valuation as attractive. We’ve marginally trimmed our estimates, reflecting updated FX assumptions.”


In other analyst actions:

* After better-than-expected quarterly results, CIBC World Markets analyst Kevin Chiang raised his Mullen Group Ltd. (MTL-T) target to $15.50 from $14.75 with an “outperformer” recommendation, while BMO’s John Gibson increased his target to $18 from $17 with an “outperform” rating. The average is $15.41.

“MTL’s Q2/21 results were above expectations, driven by resiliency in its consumer-related businesses and a surprise from its recent Bandstra acquisition. The company also raised its M&A revenue guidance, based on a strong start to its acquired businesses,” said Mr. Gibson.

* BMO Nesbitt Burns’ Thanos Moschopoulos cut his target for Real Matters Inc. (REAL-T) to $18 from $20 with a “market perform” rating ahead of the release of its third-quarter results. The average target on the Street is $24.50.

“We’re apprehensive about recent softness in the U.S. residential purchase market (from a transaction volume perspective) and by the risk of potential weakness in the refi market over the next year, assuming that mortgage rates return to an upward trajectory,” he said. “We do see potential upside to the stock, should the rate environment prove to be more favorable than we’re expecting—particularly if REAL can sign up additional Tier 1 lenders for Title over the coming months.”

* Raymond James analyst Frederic Bastien increased his Aecon Group Inc. (ARE-T) target to $26 from $23, topping the $22.50 average, with a “strong buy” rating.

“Our bullish recommendation on Aecon Group is reaffirmed after the contractor produced yet another solid quarter yesterday,” he said. “A strong and balanced order intake across end markets during 2Q21 is also putting to rest any Street concerns of a shrinking backlog and giving us sufficient visibility to roll our valuation forward to 2022 (for a new target price of $26). Also backing our constructive view is ARE’s healthy balance sheet, the growth of its highly-profitable nuclear activities, and its leadership position on the sustainability front.”

* Cormark Securities analyst Jeff Fenwick raised his Fairfax Financial Holdings Ltd. (FFH-T) target to $700 from $675. The average is $701.07.

* Cormark’s David McFadgen raised his target for Rogers Communications Inc. (RCI.B-T) to $74 from $71, topping the $72.47 average, with a “buy” rating.

* Scotia Capital analyst Mark Neville cut his Winpak Ltd. (WPK-T) target by $1 to $51 with a “sector outperform” rating, while BMO’s Stephen MacLeod lowered his target to $45 from $48 with a “market perform” recommendation. The average is $47.50.

“WPK’s Q2/21 results came in well ahead of expectations,” he said. “Commentary re: volume growth (potentially sustainable at 1H/21 levels) and margin (potential upside as selling price adjustments kick in) were also quite constructive, in our opinion. Selling price adjustments should also provide a meaningful uplift to 2H revenues. Management also indicated that acquisition opportunities have started to resurface – although we hesitate to get too excited as acquisitions have been few and far between. Post results, we have increased our 2021E/2022E by approximately 10 per cent/4 per cent.”

* Mr. Neville lowered his ABC Technologies Holdings Inc. (ABCT-T) to $14 from $14.50 with a “sector outperform” rating. The average is $11.38.

* National Bank Financial initiated coverage of Magnet Forensics Inc. (MAGT-T) with an “outperform” rating and $35 target, exceeding the $30.17 average.

* National Bank’s Vishal Shreedhar lowered his Saputo Inc. (SAP-T) target to $40 from $41, keeping a “sector perform” rating. The average is $42.33.

* National Bank’s Gabriel Dechaine increased his target for Great-West Lifeco Inc. (GWO-T) by $1 to $37 with a “sector perform” rating. The current average is $38.89.

* National Bank’s Michael Parkin cut his Newmont Corp. (NGT-T) target to $104 from $105, reiterating an “outperform” rating. The average is $108.

* National Bank’s Endri Leno lowered his Dialogue Health Technologies Inc. (CARE-T) to $18 from $20.50 with an “outperform” rating. The average is $19.57.

* H.C. Wainwright analyst Amit Dayal initiated coverage of Greenlane Renewables Inc. (GRN-T) with a “buy” rating and $4 target, exceeding the $2.76 average.

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