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

A group of equity analysts on the Street raised their financial expectations and target prices for shares of National Bank of Canada (NA-T) on Monday in response to its better-than-expected second-quarter financial results.

Before the bell on Friday, the Montreal-based bank reported its profit more than doubled year over year, announcing earning of $2.25 per share in the three months that ended April 30, compared with $1.01 a share in the same quarter last year. On average, analysts expected earnings per share of $1.99.

“More importantly, on a PTPP basis, earnings beat our estimate, with the outperformance driven by Canadian P&C banking, wealth management and capital markets, while US specialty finance and international was slightly below our estimate,” said Desjardins Securities analyst Doug Young.

Maintaining a “buy” rating for National Bank shares, Mr. Young increased his 12-month target for its shares to $100 from $94. The average on the Street is $99.27, according to Refinitiv data.

Other analysts making adjustments include:

* Canaccord Genuity’s Scott Chan to $97 from $94.50 with a “hold” rating.

“The company continues to focus on prudent cost management, which puts it in a strong position to deliver positive operating leverage this year. In FQ2, the firm delivered positive operating leverage within all segments (except Financial Markets),” said Mr. Chan.

* Credit Suisse’s Mike Rizvanovic to $100 from $96 with an “outperform” rating.

* RBC’s Darko Mihelic to $97 from $88 with a “sector perform” rating.

* BMO Nesbitt Burns’ Sohrab Movahedi to $101 from $97 with an “outperform” rating.


Canadian Western Bank’s (CWB-T) stronger-than-anticipated quarterly results also drew a positive response from the Street.

These analysts raised their target prices for its shares on Monday.

* Desjardins Securities’ Doug Young to $43 from $40 with a “buy” rating. The average on the Street is $38.69.

“The results themselves were positive. However, we were surprised by its plans to implement an at-the-market (ATM) equity distribution program, as well as the further delay in the resubmission of its AIRB application to OSFI,” said Mr. Young.

* Raymond James’ Stephen Boland to $38.50 from $35.50 with a “market perform” rating.

“Management has increased its guidance to mid-teen earnings growth for the year. That is due to higher than expected loan growth and lower provisions. Additionally, the final application for the conversion to AIRB is now expected to occur in late 2022 (pushed back from mid-2022), and even then, OSFI still has to provide approval. Even with the higher growth expectations we believe the stock is appropriately valued near book value especially if the new ATM program is utilize,” said Mr. Boland.

* RBC’s Darko Mihelic to $38 from $36 with a “sector perform” rating.

“Q2/21 results were good and the outlook for the bank has improved on lower PCLs, higher NIMs, and stronger loan growth. Our EPS estimate moves higher,” he said.

* Scotia Capital’s Meny Grauman to $43 from $41 with a “sector outperform” rating.

* Credit Suisse’s Mike Rizvanovic to $41 from $39 with an “outperform” rating.

* National Bank Financial’s Gabriel Dechaine to $39 from $37 with a “sector perform” rating.

* TD Securities’ Mario Mendonca to $41 from $38 with a “buy” rating.

* BMO Nesbitt Burns’ Sohrab Movahedi to $41 from $37 with a “market perform” rating.


Canaccord Genuity analyst Katie Lachapelle sees Cameco Corp. (CCO-T, CCJ-N) in a good position to navigate ongoing market uncertainty and “capitalize on growing demand for carbon-free nuclear power through contracting of material from its tier-one operations.”

In a research report released Monday, she initiated coverage of Saskatoon-based uranium producer with a “buy” recommendation, emphasizing its “world-class” assets, low political risk exposure and “strong” balance sheet with the expectation of further improvement.

“With decarbonization emerging as the megatrend of the next decade, we’ve seen increasing support for nuclear as a source of carbon-free, baseload electricity. We expect this to drive significant growth in uranium demand (up 43 per cent by 2035) at a time when uranium supply remains under significant pressure (25mlb deficit forecast for 2021),” said Ms. Lachapelle. “However, as contracts from the previous cycle expire, and significant uncovered demand emerges, we expect rising uranium prices (toward our long-term price of $60 per pound) to motivate utilities to lock in new long-term contracts. In our view, this backlog of demand presents a substantial opportunity for CCO as it looks to replenish its contract book at higher prices.”

“CCO exited Q1/21 with $1-billion in cash and ST investments, a very strong net cash position of $48-million, and $1-billion undrawn on a revolving credit facility. While we expect cash flow generation to remain muted in 2021 (due to material spot purchases), we forecast a significant ramp-up in free cash flow from 2023 onward, reflecting higher uranium prices, growth in Cameco’s long-term contract book, and a restart of production at McArthur River (2024). Furthermore, we believe it is likely that CCO will recover $303-million in cash and $482-million in letters of credit upon resolution of its long-running dispute with the CRA.”

She set a target of $27 per share. The current average on the Street is $23.38.

“Cameco shares currently trade at 1.4 times NAV and 34 times ntm [next 12-month] EBITDA, within its historical range but above peers at 1.0x NAV and 10 times EBITDA,” the analyst said. “Elevated multiples reflect improving sentiment, in addition to lower-than-average EBITDA as a result of ongoing production suspensions and unplanned COVID-19 disruptions. We note that Cameco traded at an average of 23 times EV/EBITDA during the last uranium bull market (2004-2007), with peak EV/EBITDA multiples of more than 40 times. We see the potential for multiple expansion toward and above the top end of historical ranges if the uranium price continues to push higher. As the only large-cap, pure-play uranium producer listed in North America, CCO is often the go-to name for investors seeking uranium exposure.”


Pulse Seismic Inc.’s (PSD-T) announcement of a $17-million data licensing contract “should inject confidence” in its outlook, according to iA Capital Markets analyst Elias Foscolos.

“Beyond the immediate boost to the income statement, the transaction positions the Company to be debt-free shortly,” he said. “Investors should now have significant comfort in PSD’s base and upside potential despite fluctuations in revenue. As a result of Friday’s news release, we have boosted our financial projections for 2021 and 2022.”

With those changes, Mr. Foscolos raised his rating for the Calgary-based seismic data library company to “speculative buy” from “hold.”

“The $17-million licensing agreement originates from recent industry M&A activity,” he said. “However, not all the data appears to be classified as transactional revenue (sales triggered by corporate or asset transactions), with a portion of the revenue categorized as traditional revenue (sales triggered by exploration or development drilling). PSD will deliver a portion of the data and receive $7.3-million upon signing the contract with the remaining $9.7-million to be received by mid-April 2022 based on additional seismic requested by the purchaser. The fact that this is not a purely transactional sale underscores the cautious optimism we have been forecasting as it appears that E&P producers are starting to purchase seismic with the intention of drilling wells.

“Placing Friday’s announcement into context. Over the past 10 years, PSD’s revenues have fluctuated from a high of $64-million (2012) to a low of $10-million (2018). During that time, transactional revenue has varied from $45-million (2012) to $1-million (2018). Assuming we categorize the announcement as a transactional sale, Friday’s licensing agreement would be the third-largest seismic data sale in the past decade.”

Mr. Foscolos will have a significant impact on Pulse Seismic’s balance sheet, estimating it could be debt-free within one year based on his current forecasts. He thinks that could lead to either an issuer bid or a dividend.

After boosting his revenue projections, the analyst raised his target price for its shares to $2.30 from $2, which is the current average on the Street.


In his weekly report on energy infrastructure companies, Mr. Foscolos also upgraded Keyera Corp. (KEY-T) to a “buy” rating from “hold,” citing a “slight downtick” in its share price compared to his $33 target. The average on the Street is $31.65.

“Last week, three major events opened the eyes of industry observers across the oil and gas sector,” he said. “The first was in the Netherlands, where a court issued a landmark ruling against Royal Dutch Shell (RDSa-AS, Not Rated) ordering the company to act faster than its current target to cut carbon emissions to net-zero by 2050. Secondly, at Chevron’s (CVX-N, Not Rated) shareholder meeting, investors passed a resolution compelling the company to accelerate its efforts to reduce its contribution to climate change. Investors are determined that Chevron needs to do more than power its operations with renewable energy, such as cutting back on its oil production. Lastly, a shareholder revolt took place at Exxon Mobil (XOM-N, Not Rated) where activist investors were able to place two new directors on the company’s board in order to influence it to prepare for the energy transition.”

“Our coverage universe had varying returns last week that were mostly negative with four of thirteen stocks posting positive returns and only one (TRP) slightly outperforming the TSX.”


Following a “strong” first quarter that exceeded both his revenue and earnings expectations, Canaccord Genuity analyst Robert Young upgraded WeCommerce Holdings Ltd. (WE-X) to a “buy” recommendation from “hold,” seeing its momentum continuing with the its recent US$110-million deal for Pte. Ltd.

“With the acquisition of Stamped closed, Q2 is expected to be another strong quarter, although the risk from the acquisition integration and CFO transition persists, in our view,” the analyst said. “Management provided positive commentary on the new CFO search and an announcement can be expected soon. The M&A pipe appears to be robust with $100-million-plus of revenue and a variety of targets ranging in size and valuation. However, we believe WeCommerce will focus on integrating Stamped and executing tuck-ins complementary to Stamped given the size of the acquisition and that WeCommerce has negligible cash on hand ($5.6-milliom) to acquire further. We believe it may access the capital markets to fund its M&A strategy.

“That said, WeCommerce’s operational profile appears strong, especially with the addition of Stamped, and a recent pullback in share price implies a reasonable valuation compared to its growth profile, in our view. As a result, we are upgrading WeCommerce.”

On Friday, the Vancouver-based holding company, which owns a family of companies and brands in the Shopify partner ecosystem, reported revenue of $6-million, up 45 per cent year-over-year and topping both Mr. Young’s $5.7-million estimate and the consensus projection on the Street of $5.8-million. EBITDA of $2-million also topped expectations ($1.8-million and $1.9-million, respectively).

“We expect Stamped to add $4.2-million of revenue in Q2, adding early a full quarter worth of top line,” said Mr. Young. “With strong results in Q1, we are confident in our Q2 estimates and have left them unchanged. We have nudged up our 2021 and 2022 estimates slightly. We believe our estimates for Stamped are conservative with potential for upside, although, this may be slightly offset by reopening taking the steam out of Shopify’s GMV growth.”

He maintained a $20 per share target. The average is $21.50.

Elsewhere, TD Securities analyst Daniel Chan cut his WeCommerce target to $20 from $23, maintaining a “hold” recommendation.

In a separate note, Mr. Young trimmed his target for shares of Pivotree Inc. (PVT-X), a Toronto-based global commerce services provider, to $9 from $10.75 with a “buy” rating. The average is $12.25.

“Pivotree reported results broadly in line with our estimates and consistent with the trends outlined last quarter,” he said. “While bookings were strong, mix is weighted toward pro-services consistent with the norm at the front end of larger wins. Churn remained a headwind in Q1, driven by legacy/hosting clients and lingering COVID impact, limiting impact of Managed Services bookings. Management was bullish on underlying trends with bookings strength continuing past Q1. The net impact of this is a shift in our estimates from managed services, down QoQ in Q2, to professional services in the short term, creating a bit of a flat spot. A pickup in sales activity and pipeline expansion coupled with expectations for current PS to begin to convert to MS starting in Q4 provides reason to remain positive. The wildcard is M&A which management indicates is culminating in H2 with 3+ mid-size deals ($3-million-5-million revenue) in advanced diligence on attractive terms (sub 2-times sales multiple for double-digit growth and positive EBITDA). While Pivotree will likely languish in the penalty box until M&A or Q4 growth re-invigorates investors, we have stuck with our BUY rating.”


It’s a good time to buy Calian Group Ltd. (CGY-T), according to Desjardins Securities analyst Benoit Poirier, seeing the Ottawa-based tech firm offering “compelling short-term and long-term value for investors.”

“Management’s disciplined M&A strategy has unlocked significant value creation from CGY’s $69-million equity offering (February 2020),” he said in a research note released Monday. “In 12 months, management has deployed $77-million of cash to complete six acquisitions in three different segments (Advanced Technologies, Learning and IT). More importantly, management remained true to its disciplined capital allocation strategy by realizing these transactions at an aggregate EV/TTM EBITDA multiple of 5.5 times (CGY currently trades at 13.8 times).

“That being said, we note that the stock is down 9 per cent from the offering price of its second equity offering of $80-million completed in March 2021, despite reporting impressive 2Q results (including 21-per-cent organic growth) in the interim. At the time, we viewed the offering as an opportunistic financing to strengthen the war chest following its largest acquisition to date (Dapasoft) and to continue deploying capital toward M&A.”

With its financing efforts and “strong” free cash flow generation, Mr. Poirier projects Calian to exit fiscal 2021 with a new cash position of $115-million. If it properly leverages its balance sheet, he estimates it will have access to $210-million of dry powder and expects management to focus M&A efforts on diversifying its Health and Advanced Technologies segments into new markets and verticals.

“We believe it could also consider tuck-in opportunities for Learning in Europe,” he said. “While remaining true to its mantra of disciplined capital allocation, we expect management to continue to look for larger transactions now that the M&A playbook is well-established. Management’s strong track record of capital allocation (ROIC has averaged 23.1 per cent over the past five years) gives us confidence that it can unlock significant shareholder value from this fresh injection of cash into the business.

“Assuming CGY deploys its entire net cash position ($115-million) through M&A at valuation multiples in line with that of the Dapasoft acquisition (8–9 times EV/TTM EBITDA), we estimate that CGY could be worth more than $85 per share down the road (we use an EV/FY22 EBITDA multiple of 12.5 times).”

Mr. Poirier maintained a “buy” rating and $77 target for Calian shares. The current average is $78.14.


Though it reported “solid” quarterly results that featured in-line revenue and upside for adjusted EBITDA, Canaccord Genuity analyst Bobby Burleson lowered his rating for Planet 13 Holdings Inc. (PLTH-CN) to “hold” from “speculative buy” amid valuation concerns.

Planet 13 is a cannabis company based in Las Vegas but listed on the Canadian Securities Exchange.

“While sequential Q1 performance was driven largely by Medizin and wholesale, we expect broader strength in Q2 as rebounding SuperStore and tourist-fueled demand impacts the full quarter (SuperStore rebound was limited to March in Q1 results),” said Mr. Burleson. “Looking into the 2H, we expect PLTH’s momentum to accelerate on summer reopening, with the Santa Ana launch on schedule for July and an expanded register bank at the Las Vegas SuperStore supporting higher tourist volumes. Importantly, PLTH is positioning itself longer term for wholesale opportunities in CA, given the company has already gained brand traction with consumers from the Golden State (many Vegas tourists are from CA). We expect investments in production capacity to support better SuperStore 2.0 profitability metrics into 2022 as well as expand wholesale revenue streams into CA. Smaller-format store openings in Nevada, California, and other states offer further focus areas for investments that may boost revenue, profits, and PLTH’s brand visibility.”

Mr. Burleson trimmed his near-term financial expectations for the company “moderately” based on “cautious” second-half revenue and margin assumptions for its Santa Ana store, leading him to cut his target by $1 to $9. The current average on the Street is $8.67.

“PLTH trades at a substantial premium to peers (20 times vs 12 times on 2022 estimated EV/EBITDA), and we don’t see much room for multiple expansion during this next (albeit modest) investment phase,” he said.


Seeing “significant” value creation potential over the next year, RBC Dominion Securiteis analyst Nelson Ng initiated coverage of Green Impact Partners Inc. (GIP-X) with a “sector perform” recommendation on Monday.

On May 27, Green Impact Partners, formerly known as Blackheath Resources Inc., and Wolverine Energy and Infrastructure Inc. announced the closing of their business combination through a reverse takeover.

“We expect GIP’s near-term renewable natural gas (RNG) developments to be the driver of value, and since the company does not own any operating RNG assets, our valuation approach allocates limited value to the RNG developments that have an expected construction start date post 2021,” he said. “We would be more constructive on GIP after additional milestones are achieved in the coming year(e.g., completion of FEED study forthe forestry RNG development, and securing feedstock, permits, and RNG offtake contracts).”

“Management has advanced five near- to medium-term RNG developments that total $470-million of project costs with a weighted-average unlevered return of 20 per cent (11–35-per-cent range). The developments have FID dates in 2021-23, and completion dates in 2022–24. GIP currently has about $43-million of cash and no debt, which we estimate can fund the first two projects(with project debt and excess operating cash flows). If just the first RNG development (construction ready) is executed as planned, we estimate that the project could create $5 per share of value when completed (using a valuation of 8–9 times EBITDA).”

Noting its existing operating assets provide " predictable cash flows and organic growth potential,” Mr. Ng set a target of $12, touting its development upside potential.


After updating the commodity prices used in his valuation scenarios, Scotia Capital analyst Cameron Bean raised his target prices for a series of stocks in his coverage universe on Monday.

They include:

* Crew Energy Inc. (CR-T, “sector perform”) to $1.75 from $1.60. Average: $1.55.

* Kelt Exploration Ltd. (KEL-T, “sector outperform”) to $4.25 from $4. Average: $4.03.

* Spartan Delta Corp. (SDE-X, “sector outperform”) to $8 from $7.50. Average: $6.86.

* Tourmaline Oil Corp. (TOU-T, “sector outperform”) to $43 from $42. Average: $36.57.


In other analyst actions:

* Citing the global semiconductor shortage, BMO Nesbitt Burns analyst Peter Sklar trimmed his second-quarter financial expectations for Magna International Inc. (MGA-N, MG-T), but his target for its shares rose to US$115 from US$108 with an “outperform” rating. The average is US$108.67.

“We continue to believe Magna’s recent agreements relating to e-mobility highlight the company’s ability to provide parts (e.g., e-axle), engineering, and vehicle assembly capabilities to established OEMs and new BEV entrants. As well, we believe Magna will enter into more agreements and/or JVs with BEV OEMs, which should help further rerate the stock,” said Mr. Sklar.

* Cormark Securities analyst Lemar Persaud raised his targets for a trio of banks on Monday. His changes were: Canadian Imperial Bank of Commerce (CM-T, “buy”) to $157 from $144; Royal Bank of Canada (RY-T, “buy”) to $136 from $130 and Toronto-Dominion Bank (TD-T, “buy”) to $94 from $93. The average targets on the Street are $149.66, $134.25 and $92.38, respectively.

* Cormark’s MacMurray Whale raised his ATS Automation Tooling Systems Inc. (ATA-T) target to $41.50 from $32. The average is $40.50.

* Desjardins Securities analyst John Chu reduced his target for shares of Auxly Cannabis Group Inc. (XLY-T) to 60 cents from 65 cents with a “buy” rating. The average is 52 cents.

“XLY’s sales fell short of estimates while EBITDA was relatively in line. XLY’s 47-per-cent quarter-over-quarter decline in sales was more severe than we have seen from its peers (down 20–30 per cent quarter-over-quarter). Recall that we had expected industry headwinds (ie store restrictions) to impact 1Q sales. We believe the upcoming June quarter could be soft as well, given the industry headwinds,” said Mr. Chu,

* Canaccord Genuity analyst Katie Lachapelle raised her Lithium Americas Corp. (LAC-T) target to $30 from $28.50, keeping a “speculative buy” rating. The average is $25.71.

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