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

Desjardins Securities analyst Kyle Stanley upgraded his rating on Boardwalk Real Estate Investment Trust (BEI-UN-T) to “buy” from “hold,” citing second-quarter results that were modestly better than expectations and a more robust revenue growth trajectory that reflects improving apartment fundamentals in Alberta.

Mr. Stanley also felt comfort in the REIT’s ability to control costs in an inflationary environment, as well as a valuation that is below peers based on its trading price relative to funds from operations.

He raised his 12-month price target to C$62.50 from $58. The average analyst target is C$58.59, according to Refinitiv Eikon.

Key to his more upbeat assessment of the REIT is that population and employment growth have return to Alberta’s two largest cities, Edmonton and Calgary - which together account for about 62% of Boardwalk’s net operating income.

He expects continued positive trends in revenue growth continuing into this summer following the second quarter.

“Post-quarter, occupancy has improved to 97.1% in August (vs. 96.4% in 2Q22), while total portfolio new and renewal leasing spreads of 6.6% and 3.1%, respectively, in July are ahead of pre-pandemic levels,” Mr. Stanley said in a note.

Meanwhile, the company’s containment of operating expenses has set it apart from peers, he said. In the first half of this year, they rose 3.7%, well below the average of peers at 7.9%.

Boardwalk is trading at a price that is 15.0 times its free cash flow, versus 18.2 times for its peer group, he added.


Following another uninspiring quarter and dwindling cash resources, Raymond James analyst Steve Hansen downgraded Farmers Edge Inc. (FDGE-T) to an “underperform” rating - the equivalent of a sell - while slashing his price target dramatically, to 75 Canadian cents. His prior rating was “market perform” and his price target had been C$3.50.

“While the company’s largest shareholder has extended a generous $75.0 million secured credit facility to equip new management with flexibility (& time) to execute a turnaround, we’re increasingly concerned it comes too late,” Mr. Hansen said in a note.

“More bluntly, we’re concerned: 1) the company is rapidly shedding customers from its core platform; 2) its long-awaited insurance launch fell flat; 3) last year’s CommoditAg acquisition is struggling (& failing to provide the distribution benefits anticipated); and 4) the carbon program is ramping slower than expected. It is a motley confluence of challenges, in our view,” he said.

Meanwhile, the company’s cash is running out, leaving little room for error, and the company may soon need a fresh equity offering that will dilute the value of existing shares. “After a staggering $26.2 million free cash flow burn, FDGE exited 2Q22 (June-30-22) with just $8.9 million in cash (likely out as of today). While the company’s new $75.0 million credit line provides a vital lifeline, we see little room for error in the turnaround plan (details to be revealed next quarter). Accordingly, we have modeled a $45.0 million equity raise in 2023 to fill the associated gap that emerges,” he said.

Farmers Edge was one of the first companies last year to kick off what proved to be a record year for Canadian technology IPOs on the Toronto Stock Exchange, as 16 such companies went public. The company, co-founded in 2005 by a former agronomist, collects data on a range of crop, land and weather conditions from sensors on millions of acres of agriculture land. It then uses artificial intelligence and predictive modelling to suggest the right inputs to help farmers improve yields.

The average Street target is C$2.04.


RBC analyst Rishi Jaluria downgraded Docusign Inc. (DOCU-Q) to a “sector perform” rating, concerned that the company’s turnaround will take a long time to materialize, especially without a CEO at the helm.

Mr. Jaluria, who previously rated the company “outperform,” also reduced his price target to US$65 from $80. The average analyst target is US$87.97.

“We foresee a long path to turnaround for DocuSign, which is effectively on hold until the company finds a new CEO,” the analyst said in a note to clients. “We still see a path to accelerating growth, but it requires better sales execution, new use cases, stronger international traction (especially in newer markets), and greater adoption of CLM [Contract Lifestyle Management software] and other products. These turnarounds take time, and it could take several quarters, even after a new CEO joins, before we start to see signs of a successful turnaround,” the analyst said.

DocuSign, a leading provider of electronic document signing, saw a surge in activity in the early days of the pandemic when face-to-face communications was largely cut off. But its popularity slowed when strict COVID restrictions were lifted across major economies.

“DocuSign has had too many ongoing execution issues, with high employee turnover. It’s very clear in retrospect that DocuSign salespeople got complacent during COVID, with demand coming to them, as well as benefits from overages, and did not proactively generate demand or new use cases. We’ve seen significant turnover in the employee base and expect that to continue with a leadership void (recall, there’s an interim CEO who doesn’t come from the world of software),” the RBC analyst said.

Mr. Jaluria now thinks the company faces a credibility gap with investors. “The fact is DocuSign has guided down billings three quarters in a row, missed its own billings guidance, and, in our view, downplayed both the benefits from overages/early renewals, as well as its total exposure to mortgages/ loans. We believe it will take a while for DocuSign to regain credibility.”

While he still believes DocuSign could see better days, for now shares will be range-bound until there is evidence of a successful turnaround. “Additionally, while we still believe DocuSign is exploring a sale, the fact is a $20-billion check (~30% premium to current levels) would be tough to write for both private equity and strategic buyers, making a sale somewhat less likely now,” he said.


Several analysts raised their price targets on Deere & Co (DE-N) following mixed, but generally well received, fiscal third quarter results last week.

Deere, the world’s largest producer of agricultural equipment, reported earnings per share of US$6.16 on revenue of US$14.102-billion. The Street consensus was for $6.65 in EPS and $13.795-billion in revenue.

“The top-line beat demonstrated DE’s execution in ramping production, while bottomline miss and narrowed net income guidance reflected persistent cost inflation,” noted Oppenheimer analyst Kristen Owen.

She said she remains “constructive” on Deere and lifted her price target to US$415 from $365 to reflect her updating financial estimates for the company.

“While execution remains at the fore, we see sustained production rates, strong pricing, and improved raw material cost inflation establishing a favorable backdrop coming into FY23,” she said in a note to clients. “Industry demand dynamics remain strong, outpacing improved production rates. We believe that despite the later-stage replacement cycle, agriculture represents one of the few end markets positioned for sustained earnings growth in 2023, and is more resilient in a potential recession.”

In other Street actions, Credit Suisse raised its target price on Deere to US$447 from US$393; Jefferies raised its target price to $450 from $400; and JP Morgan raised its target to $375 from $325.

The average Street target is now US$393, up from $387 a month ago.

BMO’s John Joyner, who has a US$375 price target on Deere, was among some analysts expressing caution.

“Demand for agricultural machinery is running above the industry’s ability to supply. Meanwhile, the age of the installed base of equipment is probably around ten years versus seven historically. Thus, we are not surprised by Deere’s building conviction in a sustainable upward trajectory for the industry,” Mr. Joyner said.

“However, it is probably too early for even the most optimistic investors to conclude that Deere’s profits will no longer be driven by cyclical forces. Therefore, we continue to rate Deere shares Market Perform,” he said.


A slew of analysts raised their price targets on Foot Locker Inc (FL-N) in the wake of the apparel maker’s second-quarter results and announcement of Mary Dillon being tapped as its new CEO.

Ms. Dillon is the former head of Ulta Beauty and replaces Richard Johnson, who will be retiring. Foot Locker reported a smaller-than-expected drop in comparable sales for the second quarter and profit above estimates. Mr. Johnson will continue as executive chairman of the board through Jan. 31.

“We see Dillon as uniquely qualified for the role and believe it will be a game changer for FL thesis in the long term,” said Barclays analyst Adrienne Yih, who upgraded her rating to “equal weight.” Her price target is US$38.

Elsewhere, B. Riley raised its target price to US$36 from US$33; Citigroup raised its price target to $38 from $25; Cowen and Company’s target went to $35 from $29; Evercore ISI raised its target price to $40 from $33; Guggenheim raised its target price to $43 from $36; Jefferies raised its target price to $47 from $43; and Telsey Advisory Group raised its target price to $42 from $31.

The average target is now US$36.05, up from $30.89 a month ago.


In other analyst actions:

IM Cannabis Corp (IMCC-CN): Cormark Securities cuts target price to C$1.25 from C$6

Shawcor Ltd (SCL-T): Cormark Securities raises to ‘buy’ from ‘speculative buy’

Vermilion Energy Inc (VET-T): JP Morgan raises target price to C$27 from C$24; CIBC raises target price to C$36 from C$34

Cineplex Inc (CGX-T): TD Securities cuts target price to C$17.5 from C$18.5

Crew Energy Inc (CR-T): TD Securities raises target price to C$8 from C$7.5

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Follow Darcy Keith on Twitter: @eyeonequitiesOpens in a new window

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