Inside the Market’s roundup of some of today’s key analyst actions
Cantor Fitzgerald analyst Mike Kozak upgraded his rating on Cameco Corp. (CCO-T) to a “buy” from “hold” after the uranium producer announced late Friday that it was restarting its Cigar Lake mine in Saskatchewan.
Production at Cameco’s flagship operation - one of the biggest producers of uranium in the world - was temporarily suspended in December of last year after several employees tested positive for COVID-19. “Following enhanced safety measures implemented at the mine along with the provincial vaccine rollout in Saskatchewan, Cameco has committed to restarting production at the mine later this month,” Mr. Kozak noted.
Cameco did not release any upgraded production guidance, but Mr. Kozak expects a “slow and steady” approach and the mine is unlikely to reach its full nameplate capacity of 18 million pounds of aluminum per share until the first quarter of 2022. In the meantime, Cameco remains a buyer on the uranium spot market to meet deliveries promised under contract.
Mr. Kazak also commented that sentiment in the uranium sector has turned increasingly positive over the last few months and there has been a sharp move higher in spot uranium prices over the past month.
“As a reminder, under the Biden Administration, the United States has rejoined the Paris Climate Agreement that calls for net-zero carbon emissions for most of the developed world by 2050. With uranium currently generating 80% of carbon-free grid power in the United States, coupled with the aggressive nuclear power expansion plans of China (the world’s second largest economy), it has become abundantly clear that nuclear power has a critically important and growing role to play in the energy mix of the future,” he said in a note.
His price target on Cameco rose to $24 Canadian, up from $20.50. “Cameco should be a core holding for any/all institutional investors with a uranium focus, energy allocation, or Environmental, Social, and Governance criteria,” he said.
The average analyst price target is $21.30 Canadian, according to Refinitiv Eikon data.
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BMO analyst Peter Sklar downgraded Maple Leaf Foods Inc. (MFI-T) to “market perform” from “outperform,” citing challenges facing the company’s plant protein group. His price target is $28.
Mr. Sklar had previously projected peak EBITDA losses for the plant protein group would occur in the third quarter of last year. “However, given the modest growth in the U.S. retail channel, increased competition, and pricing pressures, we are concerned that the segment will be challenged to achieve the target growth rate of 30% in 2021 and that EBITDA losses will prove to be more protracted as the company continues to spend in order to build brand equity,” he said.
The average analyst price target is $35.06.
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Canaccord Genuity more than doubled its target price on Tesla Inc. (TSLA-Q), to US$1071 from US$419, and upgraded its rating to “buy” from “hold,” believing that an “Apple-esque ecosystem” of energy products is in the company’s future.
Analyst Jed Dorsheimer said Tesla’s industry-leading technology and production capacity gives the company the edge in radically changing the battery power market.
“Tesla has positioned itself as The Brand in energy, and as its solar and energy storage products supply constraints are removed, consumers will be able to become more entrenched in its electrification ecosystem,” Mr. Dorsheimer said.
“Consumers rave about the in-car software of Tesla and the ease of connectivity. We expect this consumer/product interaction and admiration to intensify as consumers add solar generation and Powerwall storage products, mimicking the all-encompassing Apple product ecosystem.”
The average analyst price target is $651.26.
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Several analysts raised their price targets on Corus Entertainment Inc. (CJR-B-T) after the media company announced better-than-expected earnings last week and signed a distribution deal with U.S. streaming service HULU.
Canaccord Genuity hiked its target to C$7.50 from C$7; CIBC’s went to C$7.25 from C$6.25; and Scotiabank’s rose to C$10 from C$6.
Scotiabank analyst Jeff Fan, who rates the stock as a “sector outperformer,” argued that the time has come to reassess Corus Entertainment’s heavily discounted valuation.
“CJR has been cheap for a while. Why? We think it reflects the market’s concerns about the long-term future of Canadian TV broadcasting, in particular the disintermediation by streaming services, the loss of future content supply (or more costly) and the continued regulatory burden,” he said in a note.
“We think it is time for the market to reassess because we see more tangible progress on initiatives that address the above secular issues, plus the last COVID-19 difficult y/y comparison quarter is now behind us. We believe the tangible progress includes: 1) StackTV, 2) higher content sales outside Canada for higher-margin revenue and better future content supply for the advertising video on demand opportunity, and 3) Bill C-10 (the amendment to the Broadcasting Act),” he said.
The average analyst target is $7.83.
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Scotiabank analyst George Doumet raised his price target on MTY Food Group Inc. (MTY-T), but maintained a “sector perform” rating, after the company reported mixed fiscal first quarter results last week.
Adjusted EBITDA of $32.6-million was below the consensus estimate of $34.1-million. Consolidated same-store sales declined 24 per cent, worse than the analyst had expected - but that metric should rapidly improve as stores open in coming months after being shut for the pandemic.
“We highlight that the company has done a good job generating strong free cash flow during the pandemic, and as a result of that, now expects to resume dividends, share buy-backs and its M&A strategy in 2H/21,” Mr. Doumet noted. “While we are encouraged by this and are looking forward to the recovery (especially in Canada) in 2H/21, we believe this is largely priced into the shares with MTY now trading above 12x EV/adj. EBITDA on our ’22 (more normalized) estimates.”
His new target is $57.50 (Canadian), up from $50.
Separately, National Bank of Canada also raised its price target on MTY Food Group, to $58 from $55, and TD Securities raised its target to $58 from $56.
The average analyst target is now $57.94.
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iA Capital Markets upgraded Secure Energy Services Inc. (SES-T) to “speculative buy” from a “hold,” believing the stock’s recent pullback offers an opportunity for investors. It also raised its target to $5.50 from $4.75.
“While SES is ultimately an asset-heavy company and will likely need to return to more normalized levels of CAPEX in the future, the company can limit maintenance capital and generate solid funds flow from operations during low points in the cycle as was demonstrated in 2020,” analyst Elias Foscolos said in a note.
Secure Energy Services Inc. announced last month it would buy waste management services firm Tervita Corp. (TEV-T) in an all-stock deal valued at $478 million. Mr. Foscolos acknowledged the deal comes with some regulatory risk, and as a result, expects a modest amount of asset dispositions.
“However, we believe that there is still significant value from projected synergies, an accelerated step-down in run-rate leverage, enhanced scale, and greater capital markets relevance,” he said.
He also upgraded his rating on Tervita to “speculative buy” from “hold” and increased his price target to $7 from $5.75.
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In other analyst actions:
Domtar Corp. (UFS-N): Citigroup raises price target to US$46 from US$41.
Exxon Mobil (XOM-N): Jefferies raises price target to US$55 from US$45 and upgrades its rating to “hold” from “underperform.”
Freeport-Mcmoran Inc. (FCX-N): Scotiabank raises price target to US$42 from US$35.
Gamestop Corp. (GME-N) Ascendiant Capital Markets cuts price target to US$10 from U$12 US and downgrades rating to “sell” from “hold.”
Ovintiv Inc. (OVV-N): Credit Suisse raises price target to US$28 from US$24.
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Darcy Keith