Inside the Market’s roundup of some of today’s key analyst actions
In reaction to recent share price appreciation, Industrial Alliance Securities analyst Elias Foscolos lowered his rating for Inter Pipeline Ltd. (IPL-T) to “hold” from “speculative buy” on Monday.
“IPL has led our coverage universe since our last update, returning 18 per cent and retracing some of the above-average losses the stock has experienced due to the impact of COVID-19 coupled with negative company-specific sentiment,” said Mr. Foscolos in a research note.
“Although IPL continues to lag on a year-to-date basis, we believe that the recent $700-million financing should provide a confidence boost for investors.”
He maintained a target price of $14.50 per share, exceeding the average on the Street of $12.68.
After its shares jumped almost 38 per cent following the premarket release of its first-quarter financial results on Friday, Canaccord Genuity analyst Matthew Lee downgraded MAV Beauty Brands Inc. (MAV-T) to “hold” from “buy.”
“While we continue to believe that MAV has solid long-term upside as it capitalizes on the secular growth in masstige haircare, shares are up to $3.75 (over 35-per-cent one-day increase) post Q1 earnings, which we believe represents fair value given near-term economic uncertainty,” he said.
The Vaughan, Ont.-based company reported adjusted EBITDA for the quarter of $8.3-million, up 34 per cent year-over-year and ahead of the projections of both Mr. Lee ($7.1-million) and the Street ($6.2-million). Revenue of $31.4-million was a jump of 30 per cent and also topped forecasts ($29.8-million and $27-million, respectively."
“On the call, management highlighted that the mass/drug haircare industry in the United States is down mid-single digits through the first seven weeks of the quarter,” Mr. Lee said. “In addition, specialty retailers (which make up almost 10 per cent of MAV’s sales) largely remained closed. While this statistic excludes Canada, we believe it points to North American revenue declines of 10 per cent in Q2. For F20, we currently forecast a 4-per-cent revenue decline for the segment, which we believe conservatively accounts for increasing retail challenges relating to the pandemic.”
“Management noted that the international business has been affected by both lower retail traffic and logistics challenges that will likely persist into Q2. We currently forecast a 50-per-cent decline in international revenues for Q2 and a 36-per-cent decline for the year.”
Though he trimmed his 2020 and 2021 sales and revenue projections to account for the impact of COVID-19, Mr. Lee kept a $4 target for MAV shares. The average on the Street is $4.50.
In a research note reviewing the firm’s eighth annual U.S. Online Shopping Survey, Mr. Mahaney hiked his target price for Amazon shares to a new high on the Street, calling the company “the best global play off of online retail.”
He said the survey of over 2,800 customers found adoption of online shopping has “accelerated materially” and created “a more sustainable and permanent shift in consumer behaviour.”
Mr. Mahaney thinks Amazon is a prime beneficiary of this trend, noting frequency of use and spending trends have shown “significant” improvement.
“All in, Amazon appears to be running away with the U.S. Online Retail crown and remains in a very strong position, while Walmart’s position is incrementally improving,” he said. “It is impressive how strong and wide Amazon’s leadership position has been over the past five years.”
"Amazon continues to hold a commanding lead across all three factors, with its strongest competitive positioning being selection, followed by convenience and then price. This may simply signal that Amazon is especially hard to compete with on selection and convenience, especially the latter because of its investments around shipping and logistics, which may be the biggest moat around Amazon’s business."
Conversely, he did note that customer satisfaction levels have deteriorated with increased frequency of use.
“We view the all-time low satisfaction levels as an incrementally negative data point for Amazon — likely due to delivery delays and unavailability of essential (and non-essential) items and same-day delivery time slots due to material surge in demand for essential items during the COVID crisis (a good problem to have for Amazon, only if the company can address it fast enough),” the analyst said. “Interestingly, frequency and spend levels improved materially, which we believe speaks to Amazon’s sticky and loyal customers.”
Mr. Mahaney maintained an “outperform” rating for Amazon shares, but he hiked his target to US$3,300 from US$2,700. The average target on the Street is currently US$2,693.73.
The Valens Co. (VLNS-T) has "secured a robust and increasingly differentiated position in the cannabis extraction services market, said Raymond James analyst Rahul Sarugaser, which he calls “a critical part of the value-chain in Canada’s Cannabis 2.0 era.”
He initiated coverage of the Kelowna, B.C.-based company with an "outperform" rating.
“Fundamentally, we see value in VLNS’ capturing margins through its extraction business in the short term,” he said. "We expect this business, however, to become rapidly commoditized as VLNS’ customers escalate their in-house extraction capabilities and as competition intensifies.
“We like VLNS’ strategy of developing IP and broadening its service/product offerings as a means of building barriers to entry, and hence driving durable margins. We will be watching closely to see whether VLNS has under its roof (or in its crosshairs) technologies IP that are sufficiently unique to afford the company sustained, durable, rich margins into the future. Given VLNS’ powerful, diverse competition, we remain cautious — and hence conservative — about its prospects. But, with VLNS’ strong track record of high-quality technology development and capacity to rapidly evolve its service offerings, we are optimistic.”
Mr. Sarugaser set a target of $4 per share. The average on the Street is $7.57.
“Agility and deep technological expertise are exactly the characteristics required to succeed in the still-new, fast-iterating cannabis sector, in our view. VLNS seems to have each of these in excess,” he said.
“We believe that its capital efficient business model, solid FCF conversion and strong returns are significantly underappreciated at its current price,” she said. “While the pandemic will pressure both the top line and margins in the near term, we think that the company is well positioned to benefit from an eventual macro recovery, a tightening of trucking supply, and an increased complexity in supply chains.”
"TFII has 1) low relative capital intensity on an aggregate and segment level; 2) a track record of strong FCF generation and conversion; 3) opportunities for margin expansion (particularly in the U.S. TL segment); 4) exposure to secular growth trends in eCommerce via its last mile and same-day service offerings in Logistics; 5) diverse revenue and customer base; 6) M&A optionality; 7) a history of shareholder returns through both dividends and buybacks; and 8) attractive valuation.
Ms. Landry set a US$39 target. The average on the Street is US$35.
TD Securities analysts made a series of rating changes to real estate investment trusts in their coverage universe on Monday.
Jonathan Kelcher upgraded Allied Properties REIT (AP.UN-T) to “buy” from “hold” with a $52 target, up from $50. The average on the Street is $51.91.
Mr. Kelcher lowered Cominar REIT (CUF.UN-T) to “hold” from “buy” with a $9.50 target, down from $10.50. The average is $10.58.
Sam Damiani raised Dream Office REIT (D.UN-T) to “buy” from “hold” with a $26 target, rising from $23. The average is $26.78.
Mr. Damiani dropped SmartCentres REIT (SRU.UN-T) to “hold” from “buy” with a $24 target, which falls short of the $25.44 average.
Citing “multiple avenues to create shareholder value,” Haywood Securities analyst Colin Healey initiated coverage of GoldMining Inc. (GOLD-T) with a “buy” rating.
“GOLD has created a literal ‘mineral bank’ as a resource consolidator focused on gold projects in the Americas and has amassed a portfolio of more than 25 million ounces of gold resources across 11 of its 14 gold-focused projects,” said Mr. Healey. “GOLD shares have a strong, demonstrated correlation to gold price movements, providing utility to investors looking for leverage to gold price with access to a diversified portfolio of projects that continues to evolve. The portfolio also provides optionality through a myriad of opportunities to accrete value to shareholders via financial transactions such as the sale of an asset and retaining a royalty, and JV partnerships or earn-in agreements that can uncover additional resource potential of existing projects.”
Mr. Healey set a target price of $4.25 per share. The average on the Street is xxx.
"Aside from the metal inventory and utility as a trading vehicle for leverage to gold, we see great flexibility in GOLD’s portfolio of projects to accrete value for shareholders," he said.
“GOLD has made an excellent use of the bottom of the gold cycle to consolidate resources and will likely continue to deliver acquisitive growth. We anticipate GOLD will also take advantage of peaks in the gold cycle to divest assets, in a full-cycle buy-low / sell-high strategy, with a strong preference for cash deals and has already laid a strong foundation for this with the current suite of assets. Another potentially lucrative avenue for organic resource growth within the existing portfolio, could come via structured JVs and/or earn-in agreements with 3rd parties to expand the resource base without the use of internal capital.”
In other analyst actions:
* Credit Suisse’s Andrew Kuske reinstated coverage of Brookfield Renewable Partners LP (BEP.UN-T) with a “neutral” rating and $64 target. The average is $62.
“We regard BEP as being a best in class developer of long-dated renewable power and a savvy purchaser of distressed assets," he said.
* Seeing a “strong” setup through 2021, CIBC World Markets analyst Bryce Adams raised Centerra Gold Inc. (CG-T) to “outperformer” from “neutral” with a $17 target, rising from $14. The average is $15.84.
“We view the following as key drivers for the stock going forward: resource conversion at Kumtor, Öksüt ramp-up to steady-state production rates around year-end, and management’s disciplined approach to growth while maintaining a strong balance sheet position. All told, we view Centerra as well positioned to outperform peers over the remainder of 2020 and 2021,” said Mr. Adams.
* National Bank Financial analyst Dan Payne initiated coverage of Spartan Delta Corp. (SDE-X) with an “outperform” rating and $5 target, which falls 40 cents below the consensus.
* National Bank’s Shane Nagle resumed coverage of Maverix Metals Inc. (MMX-T) with a “sector perform” rating and $7.25 target. The average is currently $7.21.