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

After its first-quarter financial results exceeded the Street’s expectations on Wednesday, a group of equity analysts responded by raising their target prices for shares of Royal Bank of Canada (RY-T).

Those making changes include:

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* Desjardins Securities’ Doug Young to $119 from $117 with a “buy” rating. The average on the Street is $118.93.

“Overall, these were good results,” said Mr. Young. “However, in our opinion, expectations for it are higher, and results for several peers were more enticing —hence, the relative stock underperformance.”

* Scotia Capital’s Meny Grauman to $133 from $129 with a “buy” rating.

* Credit Suisse’s Mike Rizvanovic to $115 from $109 with an “outperform” rating.

“Following RY’s outsized quarter (EPS of $2.69 vs. our $2.22 estimate and $2.28 consensus), which we believe was driven by strong underlying performance across its businesses, we continue to have a favorable view on the bank’s outlook as it gains traction in domestic lending, with Cap Markets poised for further strength in the near-term,” said Mr. Rizvanovic.

* National Bank Financial’s Gabriel Dechaine to $123 from $117 with an “outperform” rating.

* TD Securities’ Mario Mendonca to $125 from $120 with a “buy” rating.

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* BMO Nesbitt Burns’ Sohrab Movahedi to $120 from $111 with a “market perform” rating.


Seeing a bullish outlook after its quarterly results topped expectations, BMO Nesbitt Burns analyst Sohrab Movahedi upgraded National Bank of Canada (NA-T) to “outperform” from “market perform.”

On Wednesday before the bell, the bank reported earnings per share of $2.15, exceeded Mr. Movahedi’s $1.81 projection and the consensus expectation of $1.71.

“Relative to us, all operating segments were stronger, particularly Financial Markets (strong trading/corporate & investment banking fees), Wealth (robust net sales/favourable markets) and USSF&I (Credigy gain/strong ABA results), partly offset by higher losses in corporate/other,” he said. “Credit was also better, with total PCL of 19 basis points (Stages 1&2: 1bp; Stage 3: 18bps) vs. our forecast of 28bps. Balance sheet remains strong with CET1 ratio 11.9 per cent/LCR ratio 154 per cent.”

After raising his 2021 and 2022 EPS estimates to $7.50 and $7.95, respectively, from $6.75 and $7.30, Mr. Movahedi hiked his target to $88 from $77. The average target on the Street is $82.27.

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“NA’s earnings profile benefits from its duopoly in Quebec, partially offset by less predictable sources (Credigy/Financial Mkts),” he said. “The International strategy has been additive to NA’s risk-adjusted growth and profitability. Nimble investors should take particular note of it growth expectations over the next year or so while taking comfort in it’s resilient ROE and strong capital/reserve levels.”

Other analysts making target adjustments included:

* Desjardins Securities’ Doug Young to $83 from $76 with a “hold” rating.

“NA recorded pre-tax, pre-provision (PTPP) earnings growth of 18 per cent year-over-year; this is top of the pack so far and will be hard to beat,” he said.

* Credit Suisse’s Mike Rizvanovic to $85 from $77 with an “outperform” rating.

“NA reported a solid Q1 that in our view was the best among the Canadian banks that have so far reported results. On the back of NA’s consistent execution, which was evident across each business line, we continue to value the bank at a premium multiple to the peers and view the shares as undervalued on a relative basis,” said Mr. Rizvanovic.

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* Scotia Capital’s Meny Grauman to $98 from $89 with a “hold” rating.

* Canaccord Genuity’s Scott Chan to $81 from $76 with a “hold” rating.

* TD Securities’ Mario Mendonca to $85 from $79 with a “hold” rating.

* RBC Dominion Securities’ Darko Mihelic to $88 from $81 with a “sector perform” rating.


Goodfood Market Corp. (FOOD-T) is “making the right strategic moves to rapidly enhance its position in the food e-commerce market,” said Desjardins Securities analyst Frederic Tremblay after resuming coverage following the closing of the Montreal-based company’s recent $60-million bought deal financing.

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“We estimate that the cash position has grown to $160-million when taking into account the equity financing. In addition, credit financing has been increased by $21-million,” he said. “These decisions are aligned with management’s desire to position Goodfood as a major player in the rapidly developing online grocery market in Canada while maintaining balance sheet strength and flexibility. Recall that the FY21 capex budget is $30-million-plus and we expect FY22 to be at or above this level, reflecting investments in capacity and automation/technology.”

Mr. Tremblay called the launch of its Goodfood WOW same-day delivery service in the Greater Toronto Area in early February, after a successful roll-out in Montreal, “an important milestone,” noting the GTA is a major growth area with a large portion of the company’s active subscriber basis.

“The rest of 2021 should feature the rollout of same-day delivery in other metropolitan areas across the country and weekly additions to the grocery product offering,” he said. “The latter is expected to continue to stimulate increases in customers’ basket sizes and order frequencies. Overall, we believe that same-day delivery and a wider selection of grocery products both enhance the customer experience. We believe Goodfood should be solidly positioned to capitalize on opportunities related to the accelerated adoption of online grocery shopping and efficiency improvement.”

Maintaining a “buy” rating for Goodfood shares, he trimmed his target to $14 from $15 to account for the increased share count. The average is $14.87.

Elsewhere, Scotia Capital’s George Doumet cut his target by a loonie to $13 with a “sector outperform” rating, while Canaccord Genuity’s Luke Hannan lowered his target to $14 from $14.50 with a “buy” recommendation.

“Given the recent pullback in all publicly traded meal-kit provider share prices, the company’s growth initiatives, and its ability to scale within the relatively underpenetrated Canadian market, we believe Goodfood shares are attractively priced at current levels,” said Mr. Hannan.

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With its operations centred on “energy rich” Alberta, H.C. Wainwright analyst Kevin Dede sees “strong” growth prospects for Hut 8 Mining Corp. (HUT-T).

He initiated coverage of the Toronto-based bitcoin miner with a “buy” rating on Thursday.

“Despite the strong price run in bitcoin since late last year, we believe well managed miners should continue to perform well in what could be a prolonged bitcoin supply and demand imbalance,” said Mr. Dede.

“Advantages specific to Hut 8 offered investors include: (1) access to almost unlimited energy, both green wind and petrochemical, plus widely available space for facilities development; (2) new mining machines and hash rate expansion through the upgrade of existing locations; (3) solid, more than three-year hands-on experience managing its own mining fleet; and (4) financial leverage extracted from bitcoin holdings, which we see collectively leading to outsized stock returns.”

The analyst thinks the company’s new partnership with privately held Validus Power Corp., announced Monday, to explore new revenue streams and energy solutions for its bitcoin mining operations “presents flexibility while vigorously signaling all-important future expansion.”

“The new Hut 8 CEO, joining early November last year, aims to raise the company’s visibility, expand its business opportunities, and communicate to constituents a strong predilection for social responsibility and sustainability,” said Mr. Dede. “One of the many objectives we see embedded in the Validus deal is driving Hut 8′s ESG (environmental, social, and governance) policy not normally associated with energy-hungry industrial bitcoin mining, where gas flarings, a byproduct of petrochemical production, consequence is squandered BTUs not converted to useable energy. Validius and Hut 8 together combine for an ESG friendly remedy enhancing petrochemical waste. Hut 8′s two existing facilities consume roughly 104 MW and deliver roughly1.0 EH/s in bitcoin-generating hash rate. Already prescribed miner upgrades should have Hut 8′s output pushing 1.3 EH/s by the end of the June quarter, reflected in our current estimates, but growth beyond that may have investors questioning the company’s ultimate potential and ability to keep pace with rapidly escalating bitcoin network hash. The Validius deal makes plainly obvious Hut 8′s ambition to: (1) build revenue opportunities, where building bitcoin hash rate stands as one and (2) proselytize Hut 8′s ESG agenda in appealing to investor social conscious.”

Emphasizing Hut shares are closely tied to the “fortunes” of bitcoin, he set a target price of $14 per share.

“Importantly, we see multiple factors enhancing investors perception of Hut 8 over the course of the year that should lead to expansion of the stock’s valuation multiple: (1) the rise and adoption of bitcoin as an investable asset reinforcing our demand and supply imbalance concept; (2) demonstration of Hut 8 mining and co-hosting capacity expansion, either through the Validus agreement or extension of Hut 8′s two pre-existing utility power agreements; (3) crafty use of the remaining 2,000 bitcoin Hut 8 holds in generating returns; (4) greater investor awareness of Hut 8′s operation in general; and (5) a potential Nasdaq listing.” he said. “Note too that our analysis points to a fair value accorded for Hut 8′s hash output, somewhat in conflict with the view on the company’s overall valuation ... An investment in Hut 8 presents risks associated with smaller companies, including dilution and concentration of operations, compounded by those associated with the cryptocurrencies such as sporadic and capricious price swings.”


Trican Well Service Ltd. (TCW-T) has recently demonstrated “model behaviour” by returning cash through its normal course issuer bid amid “challenging” industry conditions, according to RBC Dominion Securities’ Keith Mackey.

However, in the wake of the release of “strong” fourth-quarter results that met his expectations, the analyst now sees “stronger near-term return potential in other stocks given unfavourable pressure pumping market dynamics.”

“A good problem to have, but now that the stock trades above our estimate of its tangible book value of about $1.80 per share, the decision to allocate excess cash into the NCIB may become less compelling,” said Mr. Mackey. “On the call, Trican highlighted recent strategic investments in dual fuel kits, including a new Tier 4 engine trial aimed at lowering customer emissions profiles. Such strategic investment makes sense in our minds, particularly if used as an opportunity to improve contract terms including rate premiums and potentially minimum well commitments. Otherwise the advantage may be eroded as competitors catch up.”

Touting its “sound” balance sheet, he raised his 2021 and 2021 earnings expectations for Trican, leading him to increase his target for its shares to $2.50 from $2 with a “sector perform” recommendation. The average on the Street is $2.20.

“As the only publicly traded Canadian frac pure-play company, Trican offers leverage to potential increases in Canadian industry activity,” said Mr. Mackey. “We estimate a recovery in Montney completions to 2018 levels could drive material improvement in Trican’s EBITDA, assuming it holds its historical market share. We believe the consolidated nature of the Canadian frac services market also creates a potential advantage relative to the fragmented U.S. market. The top four companies complete over 90 per cent of Montney stages, and Trican is generally a top-2 Montney contractor by completion stage count.”


Canaccord Genuity’s Aravinda Galappatthige expects to see “continued strength in profitability” when AcuityAds Holdings Inc. (AT-T) reports its fourth-quarter results on March 2.

The analyst predicts the Toronto-based digital media solutions provider will see earnings similar to 2019 and 2020, including in “heavily pandemic-impacted periods.” He’s projecting 4-per-cent year-over-year growth in the EBITDA to $6.3-million, despite a 9.6-per-cent drop in revenue due to restrictions in the travel and hospitality sectors. His earnings per share estimate is 6 cents, up from 4 cents during the same period a year ago.

“We believe the main focus on the conference call will be around F2021 outlook, particularly with the rollout of illumin,” said Mr. Galappatthige. “While our forecasts call for a return to revenue growth in Q1/21 and overall revenue and EBITDA growth of 22 per cent and 34 per cent, respectively, in F21, this does not fully capture the growth opportunity in front of AcuityAds. As we have discussed in the past, we believe that illumin has the potential to drive a step change in the business model of the company and facilitate a) increasing penetration of blue chip clientele into the AcuityAds customer roster and b) accelerate the transition toward self-serve, opening up significant efficiencies. This we believe would be supplemented by the ongoing steep ramp up in CTV (connected TV) revenues, which represents significant upside to our F21 and F22 estimates, if AcuityAds can secure their fair share of the incremental ad dollars.”

“With its strong balance sheet (net cash of over $10-million), an infrastructure that can arguably support 3-4 times the current revenue base, we believe the company is well poised to derive additional value from M&A. AcuityAds’ reliance on M&A thus far has generally been quite measured. We believe that management will lean more in this direction going forward, given the magnitude of the potential accretion. The strengthening currency of AT shares and the likely U..S listing in 2021, further supports this strategy.”

Maintaining a “buy” rating for AcuityAds shares, he hiked his target to $33 from $21. The average is currently $19.54.

“With the prospect of a U.S. listing in the near term and significant potential catalysts ahead of us including progress on illumin, M&A, and upside to estimates from CTV, we are maintaining our BUY rating on AT,” he said.


In the wake of better-than-anticipated quarterly results and the €100-million acquisition of Finance Active SAS, National Bank Financial analyst Richard Tse upgraded Altus Group Ltd. (AIF-T) to “outperform” from “sector perform” with a $60 target, up from $52. The average target on the Street is $58.61.

Other analysts raising their targets for the Toronto-based provider of software, data solutions and independent advisory services to the global commercial real estate industry included:

* BMO Nesbitt Burns’ Stephen MacLeod to $63 from $58 with an “outperform” rating.

“This was new CEO Mike Gordon’s second call, and his tone was very constructive as it relates to the AA [Altus Analytics] and Tax growth opportunities, building on the strategy already in place (particularly with debt and data adjacencies), and the 2021 strategic initiatives (accelerating cloud adoption, moving into debt, developing data opportunities, digitizing Tax),” said Mr. MacLeod. “We see a long runway for growth.”

* Scotia Capital’s Paul Steep to $56 from $53 with a “sector perform” rating.

* Canaccord Genuity’s Yuri Lynk to $59 from $65 with a “buy” rating.


After its quarterly revenue and earnings results exceeded expectations, several equity analysts raised their target prices for shares of Vancouver-based Capstone Mining Corp. (CS-T), including:

* Canaccord Genuity’s Dalton Baretto increased his target to $4.75 from $3.50 with a “buy” rating. The average on the Street is $3.80.

“CS remains a Top Pick in our base metals coverage for its growth potential, leverage to copper prices, net cash balance sheet, and catalysts on the horizon. We note that CS has no cash flow exposure to any jurisdictions that may see social unrest ahead of potentially contentious elections this year. Finally, we note that CS trades at a discount to the larger copper producers we cover, both on our deck and on spot pricing.,” he said.

* BMO Nesbitt Burns’ Rene Cartier to $4.25 from $4 with an “outperform” rating.

“Following the Cozamin silver stream transaction, CS has positioned itself to significantly deleverage its balance sheet. In our view, the financial flexibility will allow CS to pursue value accretive opportunities. The strategic process under way at Santo Domingo also has the potential to unlock value for the company,” said Mr. Cartier.

* TD Securities’ Craig Hutchison to $4.75 from $3.50 with a “buy” rating.

* National Bank Financial’s Shane Nagle to $4.50 from $3.35 with an “outperform” rating.

* Scotia Capital’s Orest Wowkodaw to $4.50 from $4.25 with a “sector outperform” rating.


BBTV Holdings Inc. (BBTV-T) is “thriving in the golden age of digital video,” according to CIBC World Markets analyst Robert Bek, initiating coverage with an “outperformer” recommendation.

“Digital advertising now dominates the global ad market, while still growing at an attractive 8-per-cent annual growth rate,” he said. “Within the digital ad space, the greatest advertising driver continues to be video-based content consumption. Demographics are supportive of positive trends, especially as the world transitions to 5G mobile technologies with further penetration of mobile devices. Within this highly attractive market, BBTV already has a dominant position, with the size, content rights, relationships, and proven technology to continue to play a major role in the food chain as further growth plays out. BBTV is a rare public vehicle in this high-growth segment, beyond global tech giants.”

“Against this strong macro backdrop, BBTV is poised to materially improve its potential profitability by moving up the value chain to further exploit its extensive content licensing and relationships. By focusing on scaling its Plus Solutions product suite and direct selling potential, BBTV should be able to realize much greater profit margins, and drive a path to meaningful EBITDA, all while still building its base business to drive future growth”

Mr. Bek set a target price of $18.50. The current average is $22.17

“In our view, the current value of the business implied by BBTV shares does not reflect the prospects for Plus Solutions’ success, and the material EBITDA runway,” he said. “As execution evidence is booked, we expect a step-function response by the equity to better reflect the successful path towards management’s forward strategy.”


In other analyst actions:

* Evercore ISI analyst Jonathan Chappell lowered Canadian Pacific Railway Ltd. (CP-N, CP-T) to “in line” from “outperform” with a US$386 target, up from US$382. The average target on the Street is US$387.63.

* Mr. Chappell also raised his target for Canadian National Railway Co. (CNI-N, CNR-T) to US$120 from US$119, exceeding the US$114.65 average. He maintained an “in line” recommendation.

* National Bank Financial analyst Rupert Merer upgraded Boralex Inc. (BLX-T) to “outperform” from “sector perform” with a $50 target, down from $54. The average on the Street is $57.20.

* BMO Nesbitt Burns analyst Ray Kwan raised his target for Baytex Energy Corp. (BTE-T) to $1.50 from $1, citing an “improved commodity backdrop,” and kept a “market perform” rating. TD Securities’ Meno Hulshof raised his target to $1.30 from 90 cents with a “hold” recommendation and Raymond James’ Jeremy McCrea moved his target to $1.25 from $1 with an “market perform” rating. The average is $1.15.

“We consider Baytex’s Q4 financial results as being relatively in line. In addition, the drop in reserves isn’t surprising to us, given the lack of spending in 2020. Going forward, the outlook for Baytex is much improved, with the higher commodity prices accelerating its leverage reduction plans much sooner than expectations,” said Mr. Kwan

* National Bank’s Patrick Kenny cut his target for shares of Hydro One Ltd. (H-T) to $31 from $32, maintaining a “sector perform” rating, while CIBC World Markets’ Mark Jarvi lowered his target to $32 from $33 with an “outperformer” recomendation. The average is $31.27.

“In our view, the fundamental narrative and outlook for Hydro One (H) have not changed, and the recent share price weakness has been driven by multiple compression in the utility sector fueled by rising rate/yields. While it is hard to say when exactly the rising rate headwinds will abate, we believe we are getting to levels where fundamental investors can pick up shares for decent relative value. Overall, H continues to deliver on its strategic priorities, and its balance sheet remains in great shape to support more LDC consolidation to complement its steady organic growth profile,” said Mr. Jarvi.

* National Bank’s Zachary Evershed raised his Richelieu Hardware Ltd. (RCH-T) target to $37.50 from $36.50 with a “sector perform” rating. The average is $39.25.

* Scotia Capital analyst Phil Hardie raised his target for Equitable Group Inc. (EQB-T) to $146 from $136 with a “sector perform” recommendation. The average is currently $148.50.

* Scotia’s Trevor Turnbull increased his Alamos Gold Inc. (AGI-N, AGI-T) target to US$13 from US$12, exceeding the US$11.44 average. He kept a “sector perform” rating.

* Mr. Turnbull trimmed his target for Torex Gold Resources Inc. (TXG-T) to $29 from $30, keeping a “sector outperform” rating. The average is $32.19.

* Scotia’s Benoit Laprade increased his Canfor Corp. (CFP-T) target to $29 from $27 with a “sector outperform” rating, while Raymond James’ Daryl Swetlishoff raised his target to $40 from $37.50 with a “strong buy” recommendation. The average is $32.42.

“Despite the impressive share price rally, we note that Canfor’s shares are still lagging lumber commodity performance and also lumber peers and continue to recommend investors add to positions,” he said.

* Mr. Laprade also raised his target for Canfor Pulp Products Inc. (CFX-T) to $7 from $6.50 with a “sector perform” rating, while Mr. Swetlishoff increased his target to $13.50 from $9.50 with an “outperform” recommendation. The average is $8.40.

“We highlight Canfor Pulp as one of the few pure-play pulp investments available; our Outperform rating reflects our constructive outlook on global pulp markets. With a difficult 2H20 behind them (as maintenance downtime weighed on results) the company looks to rebound operationally amid a global pulp price rally. With strong tissue and packaging demand along with planned/ unplanned (maintenance) downtime, a weakening USD and logistics issues, pulp pricing has firmed with futures gaining on the Shanghai market,” said Mr. Swetlishoff.

* Canaccord Genuity analyst Tania Gonsalves cut her Antibe Therapeutics Inc. (ATE-T) target to $14.50 from $16.50 with a “speculative buy” rating. The average is $18.34.

* Scotia’s Ben Isaacson raised his target for Chemtrade Logistics Income Fund (CHE.UN-T) to $7.50 from $6, keeping a “sector perform” rating, while BMO’s Joel Jackson increased his target by $1 to $7 with a “market perform” rating. The average is $7.44.

“2021 seems more challenging than it should be, but assuming no operational hiccups, there has to be upside for CHE from better macro/commodity tailwinds (most notably from depressed caustic prices). This being said, the track record has been tough, and recovery may not become more apparent until H2/21E or 2022 (when we see a 60-65-per-cent payout),” said Mr. Jackson.

* Scotia’s George Doumet increased his High Liner Foods Inc. (HLF-T) to $14.50 from $11.50 with a “sector perform” recommendation, while BMO’s Jonathan Lamers raised his target to $14.50 from $11 with a “market perform” rating. The average is $16.13.

“Q4 EBITDA were essentially in line with estimates, with lower pricing offset by stronger gross margin, a good result in the context of a challenging quarter for foodservice end markets. High Liner provided guidance for further EBITDA improvement over 2021, and plans to invest in manufacturing and marketing to support sales,” said Mr. Lamers.

* National Bank Financial’s Michael Robertson raised his Enerflex Ltd. (EFX-T) target to $10.50 from $10 with an “outperform” rating, exceeding the $10.06 consensus, while Raymond James’ Andrew Bradford increased his target to $9.50 from $8.50 with an “outperform” rating.

“While we can’t point with any certainty to immediate catalysts for EFX, we suggest patience since the market is implicitly assigning next to zero value for its Engineered Systems product line,” said Mr. Bradford.

* Raymond James analyst Frederic Bastien increased his WSP Global Inc. (WSP-T) target to $145 from $140 with an “outperform” rating. The average is $131.50.

“We maintain our constructive stance on WSP Global after the engineering consultancy closed out a highly disruptive year with broadly in-line 4Q20 results,” he said. “With some big contract awards recently secured, three new tuck-in acquisitions under its belt, and a transformative deal in the environmental sector set to close imminently, we expect continued outperformance from the company in 2021. Our adjusted EBITDA forecast for the year inches 4 per cent higher, as does our target price.”

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