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A look at North American equities heading in both directions

On the rise

Paramount Resources Ltd. (POU-T) was higher after signing an agreement with Crescent Point Energy Corp. (CPG-T) to sell Kaybob Duvernay assets for $375-million.

Those assets include 130 net drilling locations across almost 65,000 net acres of Crown land.

Jason Kirby: Oil prices have turned negative for 2022, but energy investors remain bullish

They produce more than 4,000 barrels of oil equivalent a day and include a gas plant, pipelines, water infrastructure and seismic data.

Crescent Point says they are located adjacent to one of its land bases and will generate high-return drilling inventory and development opportunities.

Crescent Point intends to fund the acquisition through existing credit facilities and says the deal is expected to close in January.

It simultaneously announced a 25-per-cent increase to its quarterly base dividend, bringing the figure to 10 cents per share.

From October: Crescent Point Energy announces special dividend, reports third-quarter profit up from year ago

Laurentian Bank of Canada (LB-T) jumped after saying it earned $55.7-million in its most recent quarter as its revenue rose and provision for credit losses eased slightly.

The Montreal bank says its net income for its fourth quarter compared with a net loss of $102.9-million at the same time last year and was coupled with $257.1-million in revenue, up from $250.4-million last year.

Its diluted earnings per share for the period ended Oct. 31 amounted to $1.26 compared with a diluted loss per share of $2.39 a year earlier, when the bank was completing a strategic review of its operations.

Adjusted net income was $57.8-million and adjusted diluted earnings per share were $1.31 compared with $47.8-million and $1.06 a year prior.

Analysts on average had expected adjusted diluted earnings of $1.24 cents per share and $54.4-million in net income, according to financial markets data firm Refinitiv.

Its provision for credit losses totalled $17.8-million compared with $24.9-million a year prior.

See also: Canada’s Big Six banks reported fourth-quarter earnings this week. Here’s what you need to know

Netflix Inc. (NFLX-Q) gained after Wells Fargo upgraded the streaming giant’s stock to “overweight” from “equal weight” in a research note released before the bell titled More Ways to Win.

“Our deep dive into NFLX sees content improving churn, while AVOD [advertising-based video on demand] and paid sharing improve estimates,” said analyst Steven Cahall. “We estimate 7-per-cent revenue growth in ‘23, while our ‘25 rev/OI/EPS estimates are now 4 per cent/13 per cent/20 per cent above the Street.”

He added: “After a period of turmoil around slowing subscribers and revenue growth, NFLX is using every arrow in the quiver. The hits never seem to stop coming over any reasonable period. We see NFLX as one of the co-leaders in global streaming and over time we expect market share to benefit the few scaled players.”

Mr. Cahall hiked his target for Netflix shares to US$400 from US$300. The average target on the Street is currently US$292.72.

Broadcom Inc. (AVGO-Q) was higher after it forecast current-quarter revenue above Wall Street estimates on Thursday, signaling strong demand for chips used in data centers and networking equipment.

Companies are increasingly investing in the infrastructure needed to support a switch to hybrid work models, giving Broadcom - which makes chips for data centers, routers and Wi-Fi modems - an edge over competitors with more exposure to smartphones and PCs.

Broadcom, which counts iPhone maker Apple Inc as a major customer, also stands to gain from the global rollout of 5G and its foray into the lucrative software arena.

The company forecast first-quarter revenue of about US$8.9-billion, compared with analysts’ estimates of US$8.78-billion, according to Refinitiv data.

Revenue rose 21 per cent to US$8.93-billion in the fourth quarter ended Oct. 30. Analysts on average had expected US$8.90-billion. Semiconductor revenue grew 26 per cent, as supply chain constraints eased.

On an adjusted basis, the company earned US$10.45 per share, surpassing estimates of US$10.28.

On the decline

Lululemon Athletica Inc. (LULU-Q) on Thursday forecast holiday-quarter revenue and profit largely below analysts’ estimates, as shoppers turn cautious about spending on higher-priced clothing amid decades-high inflation, sending its shares down.

Friday's analyst upgrades and downgrades

High inflation, rising interest rates and the threat of a recession in the United States have resulted in a shift in consumer spending, impacting sales of apparel and sportswear as cash-strapped consumers focus on essentials.

The guidance is a bit conservative given “we are not in the best environment with the consumer...feel like it’s an honest caution,” said Jessica Ramirez, analyst at Jane Hali and Associates.

“But ...I do still think that Lululemon is playing a very strong game with the consumer.”

Lululemon lifted its full-year revenue and profit forecasts and beat estimates for third-quarter results.

The holiday season is off to a good start with strong traffic over the extended Thanksgiving weekend, Chief Finance Officer Meghan Frank said on a post-earnings call.

Lululemon’s inventories at the end of the third quarter rose 85 per cent to US$1.7-billion, but Chief Executive Officer Calvin McDonald said that due to supply chain constraints inventory levels were too lean last year and the company made the decision to build inventories this year.

“We remain comfortable with both the quality and quantity of our inventory,” Mr. McDonald said.

The company forecast fourth-quarter revenue between US$2.61-billion and US$2.66-billion, compared to analysts’ estimates of US$2.65-billion, according to IBES data from Refinitiv.

Lululemon sees current-quarter profit between US$4.20 and US$4.30 per share, while analysts estimate US$4.30.

In a research note released Friday, Credit Suisse analyst Michael Binnetti called the “bearish reaction overdone.”

“We think the negative reaction to the 3Q print is overblown,” he said. “Sales continue to be significantly above Consensus, and LULU noted several times that 4Q is off to a strong start (leaving room for upside to 4Q revs that are conservatively guided to decelerate by 300-400 basis points on a 3-year CAGR vs 3Q). The balance of LULU’s growth continues to be incredibly encouraging—with men’s, women’s, accessories, North America, and International all continuing to grow double-digits on three-year CAGRs.

“Bottom Line, with 2023 likely to be noisy as supply chains snap back and the consumer wrestles the macro, we expect the market to start to value growth stocks like LULU on 2024 EPS power in the near-term. LULU trades today at 27 times Consensus 2024 earnings that we think will be revised higher—only a slight premium to high quality industry benchmark Nike at 26.3 times on CY24 Consensus today.”

Roots Corp. (ROOT-T) fell after saying it earned about $2.2-million in its latest quarter as sales dropped by 8.5 per cent since the same time last year.

The Toronto clothing retailer says its net income for the third quarter fell from $10.8-million a year ago.

The decrease amounted to a fall from 25 cents to five cents in earnings per share over the year.

Analysts on average had expected a profit of 19 cents per share and $8.1-million in net income, according to financial markets data firm Refinitiv.

Sales for the quarter totalled $69.8 million, down from $76.3-million a year earlier.

Chief executive Meghan Roach says the quarter brought “more pronounced” discounting and a focus on lifestyle products instead of casual fleece wear as people returned to offices and events.

“We are continuing to strategically manage our core inventory to maintain our promotional discipline; however, we expect these factors to continue impacting our sales and margins in the near term,” she wrote in a news release.

Microsoft Corp. (MSFT-Q) slipped a day after the Biden administration moved to block its US$69-billion bid to buy Call of Duty maker Activision Blizzard (ATVI-Q), throwing a stumbling block in front of the tech giant’s plans to rapidly expand its portfolio of popular games and catch up to bigger rivals.

Microsoft, which owns the Xbox console and game network platform, said in January 2022 that it would buy Activision for US$68.7-billion in the biggest gaming industry deal in history.

Without Activision and its variety of games across mobile, consoles and PCs, Microsoft could struggle to attract users to its budding subscription service for accessing games. Drawing subscribers has become a priority for big tech companies as traditional growth sources such as ad sales become less reliable.

The U.S. software company had said it wanted the deal to help it compete with gaming leaders Tencent and PlayStation owner Sony, which has criticized the deal.

But, in its complaint, the U.S. Federal Trade Commission, which enforces antitrust law, said that Microsoft had a record of hoarding valuable gaming content.

“Microsoft has already shown that it can and will withhold content from its gaming rivals,” said Holly Vedova, director of the FTC’s Bureau of Competition

. “Today, we seek to stop Microsoft from gaining control over a leading independent game studio and using it to harm competition in multiple dynamic and fast-growing gaming markets.”

The agency set a hearing before an administrative law judge for August 2023.

Microsoft President Brad Smith said the company would fight the FTC. “While we believed in giving peace a chance, we have complete confidence in our case and welcome the opportunity to present our case in court,” he said.

With files from staff and wires