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

Saputo Inc. SAP-T continues to face serious pressures in the form of labour shortages, supply chain disruptions, and inflation, but the stage for a recovery over the coming year, Scotia Capital analyst Patricia Baker wrote.

The company closed the books on a difficult fiscal 2022 on Thursday, with adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) declining by 14.1 per cent year over year, falling slightly short of analyst expectations.

Cost inflation clearly weighed on the company’s profits over the last year, though the company is pushing to pass on higher prices and renegotiate contracts.

“While there is no doubt fiscal 2022 represented the toughest operating environment for Saputo in its history, it appears that fiscal 2023 is clearly set to be a rebound year, and we are hopeful we may see the first signs of this with the release of first-quarter results in August,” Ms. Baker said.

The pricing action does not appear to be affecting consumer demand, she added. In fact, an inability to meet demand, especially in the U.S. market, was one of the major factors squeezing Saputo’s profits last year, as an extremely tight labour market made it difficult to fill positions.

On the labour front, the company is taking action around hiring and retentions, which is starting to yield dividends, Ms. Baker said.

Ms. Baker lowered her one-year target price on Saputo’s stock to $36 from $37, while maintaining a “sector outperform” rating.


Pandemic darling stock DocuSign DOCU-Q is poised for a huge drop in Friday trading, after the company posted a big earnings miss after the closing bell the day before.

While the company’s revenues rose by 25 per cent year over year in its fiscal first quarter, that growth was overshadowed by a disappointing bottom line. Adjusted earnings for the quarter came to $0.38 per share, compared to a consensus estimate of $0.46 – a shortfall that clobbered the company’s shares in after-market trading.

With market sentiment shifting aggressively against speculative technology stocks, signs of weakness in profits are generally being met with extraordinary selling pressure.

DocuSign was a key beneficiary of the shift to working from home, especially in the early stages of the pandemic, as more and more transactions moved online.

But the company’s management underestimated how much its business would slow down, after its customers pulled forward demand during the COVID-19 crisis, said RBC Capital Markets analyst Rishi Jaluria.

Management also failed to anticipate just how much rising interest rates would impact the financial and real estate sectors – two of the company’s key verticals.

It’s unclear where the company goes from here, Mr. Jaluria said. “Stepping back, we want to like the DocuSign’s long-term story, especially given the potential for the Agreement Cloud vision to materialize, but wonder if DocuSign may be better off owned by a larger platform.”

He lowered his target price to US$80 from US$85, while sticking to an “outperform” rating.


The persistence of high crude oil prices is allowing Canadian oil companies to rapidly reduce their debt levels, and many will soon be in a position to direct their entire excess free cash flow back to shareholders, CIBC World Markets analyst Dennis Fong wrote.

The war in Ukraine, combined with years of low investment in oil and gas production, have resulted in a global shortage relative to rising demand, with little relief in sight.

With West Texas Intermediate trading at roughly US$120 per barrel, many investors are coming around to the idea that oil will remain inflated on a sustained basis, Mr. Fong said.

“Investors have an opportunity to participate more directly in oil price strength with free cash flow allocation policies favouring returns,” he said.

“As themes like energy security and concerns around cost inflation for consumers become more prominent, we believe investor interest could continue to build for energy equities.”

For the most part, companies are sticking to a model of capital discipline, emphasizing reducing debt and shareholder payouts rather than expansion and drilling.

With oil patch profits soaring, several major Canadian producers are approaching their “debt floors,” which is the trigger for starting to return 100 per cent of excess free cash flow to shareholders through share buybacks and dividends.

As a result, Mr. Fong raised his target prices on several Canadian large-cap oil and gas names:

- Canadian Natural Resources Ltd. CNQ-T increases to a target price of $95 from $90 at an “outperformer” rating.

- Cenovus Energy Inc. CVE-T increases to $34 from $30 at an “outperformer” rating.

- Imperial Oil Limited IMO-T increases to $74 from $70 at a “neutral” rating

- MEG Energy Corp. MEG-T increases to $26 from $23 at a “neutral” rating.

- Suncor Energy Inc. SU-T increases to $65 from $60 at an “outperformer” rating.


D2L Inc. DTOL-T is projecting slower growth this year, which combined with the recent compression in valuations across the software space, likely means a lower share price for the year ahead, Canaccord Genuity analyst Doug Taylor said.

But the company is also charting a quicker path to profitability, which is what many tech investors are suddenly prioritizing.

“As D2L continues to chart a path towards cash flow breakeven and, ultimately, consistent margins, the existing multiple should reinflate,” Mr. Taylor said.

D2L reported first-quarter results on Thursday, which included 21-per-cent revenue growth compared to the same quarter last year, and loss of $1.5-million in adjusted EBITDA, which is smaller than analysts were forecasting.

The company also revised its guidance for the full current fiscal year, calling for reduced revenue growth of 15 per cent to 17 per cent, compared to the previous projection of 18 per cent to 20 per cent. Meanwhile, D2L now expects to be profitable by roughly the end of next year, which is sooner than previously estimated.

“The company points to a strong pipeline of potential sales and says the strong professional services revenue is in advance of several implementations expected to go live in the coming quarters,” Mr. Taylor said.

He lowered his price target to $15 from $20 while retaining a “buy” rating on the stock.

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