Inside the Market’s roundup of some of today’s key analyst actions
Desjardins Securities analyst Jerome Dubreuil thinks Rogers Communications Inc.’s (RCI.B-T) valuation provides an “attractive entry point” for investors, pointing to growth potential expected from its $26-billion takeover of Shaw Communications Inc.,
Also believing “management’s strategic outlook has significantly improved and 2022 expectations have been reset (and are achievable),” he upgraded Rogers to “buy” from “hold” following Thursday’s release of better-than-anticipated fourth-quarter results and a “solid” 2022 outlook.
“With attention turning to the proposed SJR transaction, we believe many investors are likely to realize that the growth potential unlocked by the deal is selling at a discount,” Mr. Dubreuil said. “Indeed, we estimate that RCI’s pro forma valuation gap with BCE (on both EV/EBITDA and FCF yield) is currently very attractive vs historical levels.”
“We believe the upcoming developments at RCI are very likely to be positive for the stock, which should support share price momentum. Integration risk will remain topical in the story for several quarters, but we believe this is more than priced into the stock.”
The analyst thinks Rogers’ pro forma valuation is “attractive,” noting its discount to BCE Inc. “is in line with the standalone 10-year average, which is too cheap.”
“In our view, the combined entity (RCI plus SJR) is worth a higher relative multiple than a standalone RCI because we estimate the transaction (if approved) will (1) increase RCI’s capex efficiency given the company’s national wireline presence; (2) improve the company’s competitive positioning in enterprise solutions; (3) unlock growth opportunities through additional bundling capabilities in the western provinces; and (4) improve FCF conversion percentage of EBITDA if SJR’s wireless operations are sold,” said Mr. Dubreuil. “Hence, we believe RCI’s pro forma valuation gap with BCE should at the very least be smaller than the 10-year average, which provides an at attractive entry point for RCI given our high level of confidence that the deal will be approved.
“In the longer term (in at least three years), we agree that BCE should trade at a higher NTM multiple than RCI given (1) its network-sharing agreement with T; (2) its FTTH rollout, which should be nearing completion; (3) its more robust governance; and (4) the smaller growth outperformance potential for RCI once B2B and bundling opportunities are consumed. In the meantime, we see much higher EBITDA growth potential for RCI, which we believe more than makes up for the aforementioned factors.”
Mr. Dubreuil raised his target for Rogers shares to $72 from $68. The average target on the Street is $70.87, according to Refinitiv data.
“With much clearer skies ahead, we believe the risk related to owning RCI shares has significantly declined since the beginning of the year,” the analyst said. “We estimate the proposed acquisition of SJR has the potential to deliver strong FCF accretion and top-line growth acceleration, which is not fully reflected in the share price.”
Other analysts making target changes include:
* National Bank Financial’s Adam Shine to $74 from $69 with an “outperform” rating.
* TD Securities’ Vince Valentini to $70 from $75 with a “buy” rating.
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National Bank Financial analyst Mike Parkin thinks Agnico Eagle Mines Ltd.’s (AEM-T, AEM-N) current share price offers investors an “attractive entry point,” leading him to raise his rating for its shares to “outperform” from “sector perform” on Friday.
“Since announcing the Merger of Equals (MOE) with Kirkland Lake Gold, the share price of Agnico Eagle has underperformed its new peer group of Super Seniors,” he said. “As of the close of trading on Thursday, January 27, 2022, Agnico Eagle shares are down 6.8 per cent from the time of the merger announcement, with the other Super Seniors up over this same period. The MOE is on the cusp of closing and factored into our base case model. The current share price is at a 52-week low on both the TSX and NYSE, and based on our estimates has the pro-forma Agnico Eagle trading at compelling valuation levels on both an EV/EB.”
Mr. Parkin anticipates the Kirkland deal will close before mid-February and transform Toronto-based Agnico into “a Canadian mining champion” with annual gold production potential of 3.5 million ounces or more, with all-in sustaining costs of approximately US$900 per ounce.”
Kiladze: How Kirkland Lake morphed from gold sector rump into Agnico Eagle’s prized asset
“The production base of the pro-forma company will be heavily tied to low geopolitical risk jurisdiction, which should support Agnico Eagle trading at a premium to its peer group,” he said. “The low-cost production drives a compelling FCF [free cash flow] outlook for the company.”
Mr. Parkin also emphasized the presence of a number of “key” catalysts over the next 12 months, particularly the release of the life-of-mine plan update for Detour Lake in mid-2022. He said that report will be “of key interest ... given the recent massive increase in resources at the asset reported in early September 2021.”
After upgrading his trading multiple, he raised his target price for Agnico Eagle shares to $84 from $81. The average target on the Street is $93.65, according to Refinitiv data.
“We updated our model for the Kirkland Lake Gold Q4 operating results and rolled our model forward,” he said. “We tweaked assumptions on our Nunavut-based operations with respect to the timing of restarts post the December 2022 update where management made a prudent and quick decision to protect its local communities and workforce from the growing wave of COVID-19 Omicron variant infections. We also made several modest operational tweaks over the medium term to better align future performance with recent operation trends of the asset base.”
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Citi analyst Jim Suva said he’s “starting to gain a bit more conviction” that Celestica Inc. (CLS-N, CLS-T) may be “turning the corner to potentially higher margins and sustainable sales growth.”
Shares of the Toronto-based electronics manufacturing services company jumped 6.4 per cent on Thursday following the premarket release of its fourth-quarter financial results.
Revenue jumped 9 per cent year-over-year to US$1.51-billion, matching the Street’s forecast and falling within the guidance range of US$1.425-$1.575-billion. Earnings per share of 44 US cents was 7 US cents higher than the consensus estimate, driven by a “stronger mix of product, strong execution, and 1-cent from lower taxes.”
“Celestica sales were in line, and EPS beat by 19 per cent for the December quarter, and for the March quarter outlook, the company expects sales that bracket consensus but EPS 10 per cent above consensus,” said Mr. Suva. “These results give the clear conclusion that Celestica is executing well and driving profit margins higher despite the supply-chain challenges that are limiting upside to sales.”
The analyst did maintain his “sell” recommendation for Celestica shares, noting he is “not yet convinced that the company will have consistent organic sales growth following the past few years of customer disengagements.”
However, he increased his target to US$10 from US$9.50. The average is US$12.61.
Other analysts making target adjustments include:
* RBC Dominion Securities’ Paul Treiber to US$13 from US$11 with a “sector perform” rating.
“Q4 was solid, despite being supply constrained, which shows the ability of the company to execute in a challenging environment. For 2022, while Celestica reiterated its previously provided guidance, the company’s outlook entails positive organic growth, margin expansion and an improving mix of business,” said Mr. Treiber.
* Canaccord Genuity’s Robert Young to US$13.50 from US$12 with a “buy” rating.
“Considering a strong order pipeline and backlog, we believe Celestica’s strategy is playing out well and shares remain attractive,” he said.
* Scotia’s Paul Steep to US$13 from US$11 with a “sector perform” rating.
“We anticipate that the stock will continue to be impacted by sentiment regarding (1) the effect of reopening of various geographies and normalization in material availability in the firm’s supply chain; (2) ongoing recovery in semiconductor demand leading to improved results within the capital equipment segment; and (3) new wins in ATS helping to offset pressure related to continued weakness in the Aerospace & Defence segment,” said Mr. Steep.
* CIBC World Markets’ Todd Coupland to US$14 from US$12 with a “neutral” rating.
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After a disappointing 2021 for independent power producer and infrastructure stocks, iA Capital Markets analyst Naji Baydoun thinks it’s now time to “pick up your favourites as growth is now on sale.”
“Despite being cautious on valuations going into 2021, share price performance was below our expectations last year; a confluence of (1) monetary policy factors, (2) supply-side dynamics, and (3) company-specific operational challenges impacted share prices and overshadowed healthy underlying fundamentals and robust growth outlooks,” he said. “Companies across our coverage universe delivered 4-per-cent total shareholder returns (TSR) on average in 2021, underperforming the 25-per-cent TSR for the S&P/TSX Composite Index (with exceptions).”
“We view the 2021 share price performance as (1) having taken excesses out of relative valuations (discussed further herein), and (2) leaving room for additional share price appreciation potential in 2022 and beyond. Secular tailwinds continue to point to a long runway for growth in both the Power & Infrastructure sectors; companies that can (1) deliver strong operating performance, (2) de-risk future projects (i.e., navigate current supply-side headwinds), and (3) execute on strategic growth and diversification initiatives should outperform their peers over the near and long term. Overall underlying consensus estimates have been broadly maintained or increased throughout 2021; combined with the share price pullback, growth is now essentially on sale for long-term investors.”
In a research report released Friday, Mr. Baydoun trimmed his target prices for his top two picks for the year. They are:
* Northland Power Inc. (NPI-T, “strong buy”) to $47 from $50. The average target on the Street is $46.87.
Analyst: “Overall, we view NPI as the best investment vehicle for investors to gain exposure to the offshore wind investment theme. NPI offers investors an attractive mix of (1) stable cash flows from contracted power assets (more than 2.5GW net in operation, 10-year weighted average contract term),(2) strong potential long-term FCF/share growth (primarily driven by offshore wind projects), (3) longer-term potential upside from organic development activity and accretive M&A, and (4) an attractive dividend profile (3.5-per-cent yield, 50-70-per-cent long-term FCF payout). We expect NPI to successfully achieve significant milestones on its offshore wind growth prospects in 2022 (particularly in Taiwan), which should further de-risk these initiatives and allow the Company to move forward with the next phase of the projects. We believe that continued progress on offshore wind initiatives should provide investors with (1) greater confidence in NPI’s ability to execute on its long-dated offshore wind growth potential, and (2) additional clarity on the value of the Company’s growth projects. Furthermore, management has already executed on several strategic initiatives so far in 2022 that should extend the Company’s organic growth runway in the offshore wind sector.”
* Brookfield Infrastructure Partners LP (BIP.UN-T, “strong buy”) to US$70 from US$71. Average: US$67.60.
Analyst: “We view BIP as a unique and diversified way for investors to play the broad long-term infrastructure investment theme, with (1) access to a global, large-scale infrastructure investment platform (ownership interests in more than US$60-billion of assets), (2) defensive cash flows (90 per cent of FFO regulated/contracted), (3) visible and sustainable organic cash flow growth (6-9 per cent per year, CAGR 2020-25), (4) potential upside from accretive M&A, and (5) attractive income characteristics (3.5-per-cent yield, 60-70-per-cent long-term FFO payout, and a 5-9 per cent per year dividend growth target). In 2021, BIP’s management (1) deployed more than US$2.5-billion of equity capital (a record year by our calculations), (2) delivered record financial results, and (3) executed on US$2-billion of capital recycling initiatives to fund new growth and maintain a solid balance sheet position (also a record by our calculations). We believe that the full potential value of the Company’s recent initiatives has yet to be reflected in its share price; although BIP’s shares have maintained their relative valuation premium to other publicly listed infrastructure peers, their valuation multiples have compressed .... Therefore, as (1) BIP’s recently completed growth initiatives begin to flow through 2022 financial results, (2) current macro-economic tailwinds continue to support strong organic growth, and (3) the Company successfully executes on its advanced-stage investment opportunities (deploying current excess capital), we see further near-term upside potential in the shares. We continue to see BIP as a standout growth vehicle for long-term shareholders in the current macro-economic context.”
Mr. Baydoun also revealed “two to watch for 2022.” They are:
* TransAlta Corp. (TA-T, “buy”) with an unchanged $16.50 target. Average: $16.27.
Analyst: “We consider TA our preferred merchant and value IPP play in the Canadian Power sector. TA offers investors (1) a balanced mix of contracted and merchant power exposure, (2) improving balance sheet and cash flow fundamentals, (3) long-term upside to rising Alberta power prices, (4) a discounted relative valuation versus IPP peers, and (5) both downside protection and upside optionality from Brookfield’s strategic support. Overall, we believe that TA’s clear energy transformation growth path will enable it to (1) transition its portfolio into predominantly clean power assets, and (2) further diversify its asset base; this should (1) reduce the Company’s risk profile, (2) drive additional growth, and (3) underpin valuation multiple expansion over time. Meanwhile, the strong near-term outlook for Alberta power prices should underpin elevated FCF generation in 2022,further supporting self-funded growth, dividend increases, and potential buybacks following years of successful deleveraging. If TA is able to successfully execute on its current growth strategy, we see the potential for its shares to possibly be worth closer to $18-20/share.”
* Polaris Infrastructure Inc. (PIF-T, “buy”) to $23 from $25. Average: $26.90.
Analyst: “We believe that PIF’s shares offer compelling exposure to an undervalued, small cap, pure-play renewable IPP. PIF continues to offer investors (1) cash flow stability from contracted power operations, (2) near-term and longer-term growth opportunities linked to organic developments and potential acquisitions, (3) a healthy dividend (5.0-per-cent yield, 40-50-per-cent long-term FCF payout), and (4) a deeply discounted valuation compared with larger power producer peers. PIF’s shares remain significantly undervalued, and continue to trade at a deep discount to larger, more diversified IPP peers. Following the equity financing and there financing of the San Jacinto asset-level debt in 2021, we expect management to focus on executing additional diversification and growth initiatives in 2022. We believe that the Company is well-positioned to successfully execute on its strategic priorities in 2022, which should (1) improve its overall risk profile, and (2) act as significant and immediate catalysts for the shares (including valuation multiple expansion).”
His other target changes were:
- Aecon Group Inc. (ARE-T, “buy”) to $23 from $24. Average: $22.27.
- Boralex Inc. (BLX-T, “buy”) to $44 from $48. Average: $45.60.
- Brookfield Renewable Partners LP (BEP.UN-T, “buy”) to US$45 from US$50. Average: US$41.19.
- Capital Power Corp. (CPX-T, “hold”) to $44 from $45. Average: $45.46.
- Innergex Renewable Energy Inc. (INE-T, “buy”) to $23 from $25. Average: $23.25.
- TransAlta Renewable Inc. (RNW-T, “buy”) to $19 from $20. Average: $18.69.
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RBC Dominion Securities analyst Greg Pardy said a recent meeting with chief operating officer Jon McKenzie further reinforced his bullish stance on Cenovus Energy Inc. (CVE-T), “anchored by its operating momentum, capital discipline, rapid balance sheet deleveraging and rising shareholder returns on the horizon.”
The Calgary-based company remains his favorite integrated oil company and is on the firm’s “Energy Best Ideas List.”
“Cenovus will provide more detailed direction on its plans to allocate free cash flow in due course,” said Mr. Pardy. “At its investor open house on December 8, the company affirmed its commitment to growing shareholder returns commensurate with increasing balance sheet strength. The company also conveyed a willingness to reduce its net debt below $8.0-billion—to a range of $6.0-$8.0-billion—which equates to a net debt/adjusted EBITDA ratio of 1.0-1.5 times at US$45 WTI. Once Cenovus’ net debt is below $8.0-billion, its free cash flow allocation will begin to emphasize incremental shareholder returns. The company affirmed that it has plenty of room to boost its common share dividend, and is exploring alternative structures for shareholder returns, including special/variable dividends.
“Cenovus is much closer to the end than the beginning when it comes to its non-core disposition game plan. Over the past twelve months or so, the company has announced some $1.9-billion of non-core asset sales. These include Tucker ($800-million), the Husky retail fuel network ($420-million), and the conventional Wembley assets ($238-million). Although the company considers its Liwan (49-per-cent wi) natural gas field off-shore China as incongruent with its oil sands weighted portfolio, it remains content to reap its (pre-tax) free cash flows which amounted to about $1.2 billion in 2021. We think that Cenovus’ Indonesia holdings (which include the BD, MDA-MBH and MDK fields) are core given their production and free cash flow growth profile.”
Mr. Pardy suggested Cenovus may aim to continue “reshaping” its downstream footprint by continuing to “seek fruitful opportunities to reshape its U,S. Manufacturing operations over time, where only two of its five refineries align with its preference for an operated 100-per-cent interest.”
“From where we sit, one potential path for Cenovus to pursue would be to acquire BP’s 50-per-cent operated interest in its 160,000 bbl/ d (gross) Toledo, Ohio refinery along with BP’s 50-per-cent non-operated interest in the Sunrise oil sands project which Cenovus operates. The company would then be in a position to pipeline connect Lima-Toledo, enabling feedstock/refined product movements aimed at optimization between the two facilities,” he added.
Maintaining an “outperform” recommendation for Cenovus shares, Mr. Pardy hiked his target to $24 from $20. The average on the Street is $21.14.
“Cenovus is trading at a discount debt-adjusted cash flow multiple of 3.6 times (vs. our global integrated peer group avg. of 5.1 times) in 2022, and an elevated free cash flow yield of 20 per cent (vs. our peer group avg. of 13 per cent),” he said. “In our minds, Cenovus should trade at an average multiple vis-àvis our peer group reflective of its robust operational performance, much improved balance sheet and shareholder return initiatives, partially offset by its fractionalized downstream portfolio.”
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In other analyst actions:
* After a “slightly weaker” fourth quarter, Scotia Capital analyst Orest Wowkodaw trimmed his target for Teck Resources Ltd. (TECK.B-T) to $54 from $55 with a “sector outperform” rating, though he sees its outlook remaining “very attractive.” The average on the Street is $46.43.
“Overall, we view the update as a modest negative for the shares given our slightly lower estimates. However, we see any undue weakness in the shares as a buying opportunity, particularly given that spot HCC prices (approximately US$445 per ton) remain well above our expectations.
“We rate Teck shares SO as we anticipate the impending portfolio transformation and return to material positive FCF in 2023 to drive a meaningful re-rating in the shares over the next 12-24 months.”
* In response to better-than-expected third-quarter results and the announcement of its inaugural dividend, Mr. Wowkodaw raised his Champion Iron Ltd. (CIA-T) target to $7.50 from $7 with a “sector outperform” recommendation, while Raymond James’ Brian MacArthur bumped up his target to $7.50 from $7.25 with an “outperform” rating. The average is $7.53.
“We rate CIA Sector Outperform based on Bloom Lake’s high-grade and premium concentrate, attractive margins, capital efficient near-term growth, and attractive valuation,” Mr. Wowkodaw said.
* Following its release of “soft” quarterly results after the bell on Thursday, Desjardins Securities analyst Benoit Poirier raised his target for shares of Canadian Pacific Railway Ltd. (CP-N, CP-T) by $1 to $114 with a “buy” rating. The average is $106.35
“As expected, 4Q results were somewhat noisy due to the closing of the voting trust in conjunction with the proposed acquisition of KCS,” he said. “While management did not introduce formal guidance for 2022 due to the transaction’s many moving pieces, we are encouraged by management’s comments on CP’s standalone performance (positive revenue growth with OR improvement). We maintain our bullish stance on CP as the long-term prospects of the KCS acquisition more than offset the short-term noise.”
“We continue to like the long-term potential of the KCS transaction for value creation. As a result, we maintain our preference for CP over CN in the current environment.”
Others making changes include: Susquehanna’s Bascome Majors to US$89 from US$87 with a “positive” rating; Stephens’ Justin Long to US$77 from US$74 with an “equal-weight” rating and Wells Fargo’s Allison Poliniak-Cusic to US$87 from US$84 with an “overweight” recommendation.
* In a research note previewing fourth-quarter earnings season for Canadian life insurance companies, Scotia Capital analyst Menny Grauman cut his targets for Manulife Financial Corp. (MFC-T, “sector perform”) to $29 from $30 and iA Financial Corp. Inc. (IAG-T, “sector outperform”) to $90 from $91. The averages are $30.92 and $89.39, respectively.
“As accelerating inflation readings continue to ratchet up rate hike expectations on both sides of the border, the macro environment will remain front and center in investors minds for the foreseeable future,” he said. “And yet, while rising rates are a clear positive for the Canadian lifecos over a longer-term horizon, the focus for Q4 will remain squarely on developments closer to home. After strict lockdowns and rising COVID cases weighed on results in Q3, the focus for this earnings season will be squarely on whether those pressures persisted into Q4 and beyond. In addition, the market will also remain very focused on the implications of IFRS 17 which is set to be implemented in Canada in Q1/2023. While we don’t expect any new guidance on this front until at least the second half of 2022, it will remain a notable headwind, especially for MFC given how much of a core earnings driver new business gains are for that lifeco in particular.”
* Suggesting investors should “stand on the sidelines,” Mizuho analyst Siti Panigrahi cut his Shopify Inc. (SHOP-N, SHOP-T) target to a Street-low US$900 from US$1,400 with a “neutral” rating, expecting “a return to pre-COVID normalcy in 2022″. The current average is US$1,548.35.
“Shopify targets SMBs with a portfolio of Ecommerce solutions. We see the company’s target market as having favorable secular trends that include direct-to-consumer selling, as well as the overall growth of E-commerce,” he said. “Shopify benefited significantly in 2020 given the increased use of E-commerce platforms during the COVID-19 pandemic; however, we believe this growth should moderate as normalcy returns. Further, Shopify’s new fulfillment offering, while a large and attractive opportunity, will likely represent a drag on margins for the foreseeable future, in addition to the heightening execution risk and an elevated valuation relative to the peer group.”
* In a research report in which he reduced his targets for 46 North American retail companies to “reflect a higher interest rate environment, which has caused a repricing of risk assets and multiple contraction across the market in general (and within our universe),” Citi analyst Paul Lejuez cut his Lululemon Athletica Inc. (LULU-Q) target to US$350 from US$400 with a “neutral” rating. The average on the Street is US$438.93.
“Comp momentum has been among the best in retail and margins have expanded almost 400 basis points since 2015,” he said. “Product innovation continues to drive strong results in seemingly developed categories such as women’s pants, the men’s business is a big opportunity, and the customer has given LULU license to broaden into new categories. While Covid-19 disruptions will be a near-term headwind, there is no change to LULU’s long-term earnings power. However, with the LULU being valued as one of the most expensive specialty retail concepts ever, we believe the risk/reward is fairly balanced.”
* Following the announcement of its $38-million deal for Computex Technology Solutions, Desjardins’ Mr. Poirier raised his target for Calian Group Ltd. (CGY-T) to $80, above the $79.42 average, from $78 with a “buy” rating, while Canaccord’s Doug Taylor bumped up his target to $80 from $77 with a “buy” recommendation.
“We are very pleased with the Computex acquisition, which checked multiple strategic boxes despite the very attractive multiple paid of 5 times EV/TTM EBITDA (vs 11 times for CGY currently),” he said. “That said, we are disappointed with the stock reaction today, which in our view is a complete disconnect vs the fundamentals of the legacy business, quality of the acquisition and progress with the company’s strategy. We derive adjusted EPS accretion of 6 per cent in FY22 (two quarters of contribution) and 16 per cent in FY23. Time to buy.”
“Reiterating our bullish stance. The recent disconnect between CGY’s share price vs its strong results and the acquisitions announced by the company crystalize our bullish stance, especially in light of management’s robust track record of delivering both organic and inorganic growth. We believe the stock could be worth C$90+ once expectations roll forward to FY23 estimates. The upcoming investor day remains a key catalyst for the story, in our view”
* Ahead of the Feb. 24 release of its fourth-quarter results, Desjardins’ Frederic Tremblay cut his Cascades Inc. (CAS-T) target by $1 to $16, below the $18.29 average, with a “buy” rating.
“While cost inflation and supply chain disruptions are reducing near-term expectations, including for 4Q21, we see encouraging signs that momentum could build as 2022 progresses. This includes demand strength in containerboard and gradual normalization in tissue,” he said. “Furthermore, if successful, price increases recently announced by Cascades and North America’s three largest containerboard producers could accelerate the company’s margin improvement profile.”
* RBC’s Irene Nattel lowered his target for Saputo Inc. (SAP-T) to $37 from $40, exceeding the $36.63 average, with an “outperform” rating.
* RBC’s Alexander Jackson cut his Stelco Holdings Inc. (STLC-T) target to $53 from $64 with an “outperform” rating. The average is $51.07.
* CIBC World Markets analyst Jacob Bout trimmed his Methanex Corp. (MEOH-Q, MX-T) target to US$50 from US$52, maintaining a “neutral” rating. The average is US$51.17.
* Seeing a “constructive set up” heading into the Feb. 2 release of its third-quarter results, Stifel analyst Justin Keywood raised his target for ATS Automation Tooling Systems Inc. (ATA-T) to $61 from $58.50 with a “buy” rating. The average is $63.
“In short, we expect another strong quarter and raise our forecasts, leading to a slightly higher target price and demonstrating our conviction in ATS as a top pick for 2022. Our more optimistic outlook is based on analyzing automation peer results, ATS’ customer developments and continued confidence in management’s ability to execute in a strong growth market. Automation is not going away and the pandemic has spurred accelerated growth with the backdrop of inflation, rising wages, supply chain disruptions, among other factors. ATS is executing well by serving high valued end markets (Life Sciences, Food & Beverage, EV and Nuclear) as demonstrated with strong organic growth and rising margins. The company is also active with M&A, having deployed $1.1-billion of capital with the current management team and leading to ROE expanding from 5 per cent to 12 per cent.”
* Canaccord’s Doug Taylor trimmed his Magnet Forensics Inc. (MAGT-T) target to $45 from $48 with a “buy” rating. The average is $49.83.
“We continue to like Magnet Forensics for its compelling combination of organic growth, profitability, and strong execution since its April 2021 IPO,” he said. “We see today’s executive team expansion as coincident with the rapid investment in go-to-market activity and related revenue growth. We use the opportunity to tweak our forecasts given recent hiring and cost inflation, leading to a slight reduction in our near-term EBITDA.”
“We believe the recent broad pullback in growth equity valuations is an attractive entry point on a premium name like Magnet, with a highly recurring model, expanding TAM, and strong cash position/FCF profile to fund tuck-in M&A.”
* Morgan Stanley analyst Josh Baer cut his Lightspeed Commerce Inc. (LSPD-N, LSPD-T) target to US$44 from US$54 with an “equal-weight” recommendation. The average is US$70.84.
“With shares now 80 per cent off highs we believe the risk/reward skews positive at current levels, but LSPD is in need of a clean beat and raise with increasing payments attach and stable organic growth trends to right the ship,” he said.
David Leeder