A roundup of some of the North American equities making moves in both directions today
On the rise
Canopy Growth Corp. (WEED-T) was 15.8 per cent higher on Friday after it reported a smaller-than-expected loss in the third quarter, as the Canadian pot producer kept a tight lid on costs amid growing investor pressure to turn in a profit.
Late last year, major shareholder Constellation Brands Inc’s finance head David Klein took the helm at Canopy, months after Constellation expressed its disappointment over heavy losses the pot producer reported in 2018.
More than a year after Canada’s legalization of recreational weed, most producers have failed to show profits because of fewer-than-expected retail stores and slow overseas growth leading to oversupply.
To pacify investors impatient for profits, Canopy and its rivals started the year by announcing a wide range of cost reductions. Last week, Aurora cut 500 jobs and took a writedown of as much as $1-billion. Tilray cut 10 per cent or about 140 jobs.
“Actions taken earlier this year are expected to meaningfully reduce stock-based compensation in FY21, and we have started to implement tighter cost controls across the organization,” Canopy’s Chief Financial Officer Mike Lee said in a statement on Friday.
“We plan to take further steps to reduce our costs and right-size our business,” Mr. Lee added.
Excluding items, Canopy’s loss of 35 cents per share in the third quarter ended Dec. 31 was smaller than the average analyst estimate of 49 cents.
With the results, other cannabis producers also increased on Friday.
CannTrust Holdings Inc. (TRST-T) jumped 1.9 per cent in the wake of naming Greg Guyatt as chief executive officer late Thursday, months after it fired Peter Aceto following a Health Canada finding that the marijuana producer grew cannabis in unlicensed rooms.
CannTrust fired Mr. Aceto from the top role in July last year and named Robert Marcovitch as the interim CEO, more than two weeks after Canadian health regulator’s findings.
The regulator had canceled CannTrust’s license to produce and sell cannabis in September last year, pushing the company to announce reductions in its workforce to recoup losses.
The company said on Thursday it anticipates remediation activities at the company’s Vaughan facility to reach completion during the second quarter of 2020.
“No assurance can be given that Health Canada will reinstate either the Niagara or Vaughan Facility licenses”, CannTrust said in a statement.
First Quantum’s total copper production rose 29 per cent to 204,270 tonnes, while sales jumped 31.8 per cent.
The company has been actively developing its Cobre Panama project, which started commercial production last September, with its final mill becoming operational in mid-December. Cobre is among Panama’s largest copper mines.
First Quantum last month strengthened its defence against a hostile takeover after China’s Jiangxi Copper Co Ltd became the miner’s largest shareholder with an 18-per-cent stake. The move followed talks between the companies for a potential sale of a minority interest in First Quantum’s Zambian assets.
The miner, which is scouting for strategic partners to develop new copper projects, has said it may team-up with Rio Tinto, to develop its Peru copper mine. First Quantum owns the Haquira deposit in the South American country, while Rio owns the La Granja porphyry copper project.
In a research note, RBC Dominion Securities analyst Sam Crittenden said: “We expect a slight positive reaction with Q4 financial results as expected while cash costs of $1.24/lb were below our estimate of $1.32/lb with Cobre Panama at $1.28/lb (vs. $1.34/lb in Q3/19). FM generated positive $75-million in FCF with capex slightly below our forecast. Production and 3 year guidance were previously released. The ramp up at Cobre Panama continues to progress well which we believe can drive a re-rating in 2020.”
Expedia Inc. (EXPE-Q) rose 11.1 per cent despite announcing on Thursday it was not providing a full-year forecast as the online travel services company assessed the impact of the coronavirus outbreak on its operations.
The epidemic, which has killed more than 1,300 people in China, has raised concerns that the global economic fallout could stretch further into 2020 than what was earlier expected.
“We are not providing a specific guidance range given uncertainty on how much cost savings we’ll recognize this year and the full effect of coronavirus,” Expedia said in a statement.
On an adjusted basis, Expedia earned US$1.24 per share in the fourth quarter ended Dec. 31, beating analysts’ average estimate of US$1.19 per share, according to Refinitiv data.
Nvidia Corp. (NVDA-Q) was 7 per cent higher after it forecast first-quarter revenue that topped Wall Street expectations, powered by sales of its chips to cloud computing vendors, even as it projected a US$100-million hit from the coronavirus outbreak.
The forecast reinforced expectations of a rebound in chip demand and sent Nvidia shares up. Last month, Intel Corp and Advanced Micro Devices Inc , Nvidia’s primary rivals in selling chips to data center customers, both forecast positive trends in that market.
Nvidia is the second chipmaker after Qualcomm Inc to warn about a potential impact on its businesses due to the coronavirus outbreak.
Nvidia’s largest market is chips that enhance the graphics in video games played on PCs and laptops. But in recent years, the company has expanded to sell to data center and cloud computing customers as its chips increasingly power artificial intelligence tasks such as facial recognition and speech recognition.
Citi analyst Atif Malik said: “. We expect stock to outperform the group in 2020 on a) improving data center demand led by conversational AI and recommendation engines; b) closure of MLNX acquisition, and c) next gen 7nm Ampere platform announcement at flagship GTC conference in March.”
EBay Inc. (EBAY-Q) was up 2.6 per cent after adding US$3-billion to its 2020 share buyback plan and forecast current-quarter profit above analysts’ expectations on Thursday after closing the sale of its StubHub ticketing unit.
The company is expanding its buyback plans to US$4.5-billion.
EBay expects to post first-quarter adjusted profit of between 72 US cents and 75 US cents, while analysts are expecting 72 US cents, according to Refinitiv data.
The outlook reflects the benefit of share buybacks and investment timing, offset by the impact of the StubHub sale, the company said.
Credit Suisse analyst Stephen Ju said: “The terms and timing had already been announced, so the only uncertainty was the tax leakage, which appears to be approximately US$950-million vs our estimated $713-million. The change to 2020 guidance pins StubHub’s revenue contribution at $1.16-billion, which suggests that we had undermodeled StubHub and overmodeled Marketplaces - we hence lower our Marketplaces estimate by $90-million as a result. eBay also confirmed share repurchase should be more 1H20 weighted. As we have noted previously, EBAY shares have multiple catalysts and with StubHub now behind us, these remain: 1) Classifieds segment value unlock plan update, 2) potentially faster-than-expected payment revenue growth as eBay is likely to drive a harder fork into its own payment rails once the PayPal agreement lapses, and 3) the likelihood for a positive US GMV growth inflection as the Internet Sales Tax headwinds peak 2Q20 heading into 3Q20. Our price target is now $51 and we maintain our Outperform rating predicated on the following: 1) continued roll-out of PLA to increase marketplace take rate; 2) payments to add FCF, with potential upside from float generated from funds payable; 3) ongoing product development with its structured data initiative, which should increase conversion rates over time.”
On the decline
Gold miner Agnico Eagle Mines Ltd. (AEM-T) dropped 15.6 per cent after it lowered its full-year 2020 production outlook on Thursday, citing slower-than-expected ramp up of production at its Nunavut operations in Canada.
The company developed its Amaruq mine as a satellite deposit to supply a new source of ore to the Meadowbank mine in the Kivalliq district of Nunavut.
Agnico said it now expects full-year production of 1.87 million ounces compared with its previous outlook of 1.9 million to 2.0 million ounces. The outlook is lower than analysts’ average estimate of 1.99 million ounces.
Production would also be impacted by a more conservative mining plan in the West mine area at LaRonde, the company said.
“What we’ve decided to do in Q1 is take an opportunity to upgrade all of the ground support in the major tunnels,” Chief Executive Officer, Sean Boyd said on LaRonde.
MTY Food Group Inc. (MTY-T) shares dropped 8.5 per cent after it announced it has decided to postpone the publication of the fourth-quarter results scheduled for Feb. 18 to a date to be announced.
"The decision follows certain allegations recently made by a purported whistleblower employee," the company stated. "While MTY believes that these allegations are baseless and frivolous, the board of directors, out of extreme precaution, will take the required amount of time to address the matter in the appropriate manner."
The publications of the fourth-quarter results are still expected within the regulatory deadline, the company stated.
Mattel Inc. (MAT-Q) was down 3 per cent after it beat estimates for quarterly profit as it benefited from a robust cost-cutting program, even as holiday season sales of its flagship Barbie brand in North America were pressured by Hasbro Inc’s Frozen dolls.
The company exceeded its initial 2019 cost-cutting target of US$650-million by 35 per cent as Chief Executive Officer Ynon Kreiz looks to improve profitability through cutting jobs, closing manufacturing facilities and reducing products manufactured.
Mattel now expects US$50-million in savings in 2020 from a “capital light program,” which includes the closure of four factories in Asia, Mexico and Canada, Kreiz told Reuters.
“We’re changing the way we operate,” said Kreiz, who took the helm in 2018.
Mattel reported an adjusted profit of 11 US cents per share in the fourth quarter ended Dec. 31, racing past expectations of 1 US cent, according to IBES data from Refinitiv.
Roku Inc. (ROKU-Q) slid 6.4 per cent in the wake of beating Wall Street estimates for holiday-quarter sales and forecast full-year revenue above expectations on Thursday, as the video streaming device maker benefited from the launch of new streaming services from Walt Disney and Apple.
Roku expects full-year revenue between US$1.58-billion and US$1.62-billion, while analysts were expecting US$1.58-billion, according to IBES data from Refinitiv.
RBC Dominion Securities analyst Mark Mahaney said: “We continue to view ROKU as one of the best plays on ad-supported OTT [over-the-top], with the company being one of the bestpositioned to take share of the very large, underpenetrated $70-billion TV Ad spend opportunity. ROKU should benefit from this secular shift, especially as only 3 per cent of TV budgets have transferred to OTT while 29 per cent of audience is streaming videos, per Magna Global. And near-term, we see ROKU benefiting directly from the Streaming Wars (e.g., record Account adds) and from International expansion. ROKU has generated a very consistent, conservative financial track record thus far, and as video ad spend migrates to over-the-top, we believe ROKU can sustain robust growth in both Active Accounts and Total Hours Stream.”
With files from Brenda Bouw, staff and wires