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

After delivering “impressive” fourth-quarter results despite supply chain obstacles and inflationary pressures, iA Capital Markets’ Neil Linsdell thinks Dollarama Inc. (DOL-T) “remains extremely well-positioned to deliver dependable growth and profitability.”

He was one of several equity analysts on the Street to raise their target for shares of the Montreal-based discount retailer in response to Wednesday’s premarket earnings release, which led investors to drive its price higher by 3.6 per cent during the trading session.

“The Company has shown continued strong execution and maintained higher margins than peers ... We expect the Company to deliver strong results in fiscal 2023, even though these challenges remain in the short term, and to continue ramping up new stores across Canada and in Latin America,” said Mr. Linsdell.

Dollarama saw sales increase 11 per cent to $1.225-billion, in line with estimates, while earnings before interest, taxes, depreciation and amortization gained 20.4 per cent to $394-million, exceeding both Mr. Linsdell’s $374-million and the consensus forecast of $379-million. Earnings per share rose 32.1 per cent to 74 cents, also above expectations (68 cents and 71 cents, respectively).

Raising its quarterly dividend by 10 per cent to 5.53 cents, the company also announced a plan to introduced a $5 price point in the second half of the year.

“The Company does not treat this merely as a mark-up tool to address inflation pressures but rather an opportunity for buyers to build a better product assortment and bring some products with higher costs in-store,” said Mr. Linsdell. “Even though the gross margin is not expected to expand as a result, we see this as reinforcing the Company’s value proposition and relevance.”

After increasing his revenue and earnings expectations through fiscal 2024, Mr. Linsdell raised his target for Dollarama shares to $76 from $67, reiterating a “buy” recommendation. The average target on the Street is $72.46, according to Refinitiv data.

“The Company has multiple levers to mitigate inflationary pressures and supply chain risks in the short term,” he said. “With the introduction of the new $5.00 price point, it has more flexibility to refresh its product assortment and bring in a wider variety of products while maintaining its margins. In the mid to long term, we expect that store expansion in both domestic and international markets will continue to be the key growth driver.”

Other analysts making changes include:

* National Bank Financial’s Vishal Shreedhar to $75 from $69 with an “outperform” rating.

“While DOL indicated several headwinds, including supply chain pressure and inflation, it is managing well using various levers, including ordering earlier, product mark-up/refresh and higher price points. A stronger CAD is expected to benefit,” he said.

* Desjardins Securities’ Chris Li to $79 from $72 with a “buy” rating.

“Following the long-awaited higher price point announcement, we believe the next catalyst will be evidence that DOL can achieve the high end of its FY23 targets against highly uncertain market conditions. This could take several quarters and keep the stock range bound in the near term, especially following its strong year-to-date performance (up 12.5 per cent vs up 4.0 per cent for S&P/TSX). We maintain our positive long-term view given DOL’s desirable defensive and growth attributes,” said Mr. Li.

* Canaccord Genuity’s Derek Dley to $70 from $65 with a “hold” rating.

“While we still believe in Dollarama’s long-term growth profile — a result of its lack of meaningful competition, industry-leading profitability and free cash flow generation, and healthy ROIC — we believe the shares are appropriately valued given the context of its near-to-medium-term earnings growth outlook,” said Mr. Dley.

* Scotia Capital’s Patricia Baker to $79 from $72 with a “sector outperform” rating.

“We remain constructive on DOL and anticipate ongoing growth to be supported by the company’s strong new store opening pace in F23 (60-70 stores) and ongoing + comps as DOL attracts even more consumer dollars against the current inflationary backdrop,” said Ms. Baker. “We anticipate outperformance through 2022 given the defensive nature of the business, unique operating model, and the multiple levers to manage logistics and costs challenges. F23 should also see FX as a tailwind, while the current inflationary backdrop should provide DOL with an improved opportunity with respect to product refreshes and mark-up activity.”

* TD Securities’ Brian Morrison to $80 from $72 with a “buy” rating.

“The Q4/F22 results solidify our view that Dollarama’s attractive growth outlook remains in place,” said Mr. Morrison. “The introduction of its new price point coincides perfectly with the current inflationary environment and adds another growth driver to the multitude already in place, in addition to broadening its compelling product offering. We are increasing our target multiple and financial forecast resulting in our target price increase. We feel this is warranted due to its attractive growth outlook, and the historical consistency of its earnings. These attributes translate into investors viewing Dollarama as a defensive play in the current environment despite its above average market valuation multiple.”

* CIBC World Markets’ Mark Petrie to $74 from $68 with a “neutral” rating.

* RBC’s Irene Nattel to $79 from $77 with an “outperform” rating.


“As security of supply comes to the fore,” BMO Nesbitt Burns analyst Alexander Pearce upgraded Cameco Corp. (CCO-T) to “outperform” from “market perform” on Thursday.

“In a sector with a limited number of listed producers, Cameco’s stock trades on sentiment more than most,” he said. “Thus, with momentum for low carbon nuclear generation continuing to build and security of supply an increasingly important factor for utilities/ governments, we think Cameco’s advantageous geographical production base and its position as the largest and most liquid uranium stock means there should be further upside to its stock price.”

The rating change came after Mr. Pearce raised his near-term uranium prices by 13 per cent in 2022 and 3 per cent in 2023 to average US$51 per pound and US$46 per pound, respectively. That led to “modest” increase in his near-term cash flow, prompting a bump to his EBITDA projections (by 10 per cent and 3 per cent, respectively).

“Support for nuclear power continues to grow, particularly in some of the more mature markets where governments are considering extending reactor lifespans or indeed reversing previous closure decisions,” he said. “Both of which add incrementally to near-term demand and are underpinning increasingly positive sentiment in the sector.

“Further, and potentially more significantly, the tragic events unfolding in the Russia/ Ukraine conflict has brought security of supply into sharper focus, particularly for uranium as a strategic commodity which offers a low carbon alternative to fossil fuels. Given its advantageous location, particularly relative to the world’s largest nuclear fleet in the US, we believe Cameco is increasingly likely to benefit from positive contracting discussions with utilities following on from the promising start reported this year (40Mlb signed by start of February).”

His target for Cameco shares jumped to $42 from $33. The average on the Street is $38.07.

“We think investors will look past near-term multiples (2022/2023 EV/EBITDA 32/22 times, spot 28/16 times) as the strategic nature of the investment builds momentum and global uranium inventory levels decline,” said Mr. Pearce.


RBC Dominion Securities analyst Greg Pardy called a recent discussion with Canadian Natural Resources Ltd.’s (CNQ-T) president, Tim McKay and CFO, Mark Stainthorpe, “instructional” and reinforced his confidence in the company’s capital discipline and operational execution.

“CNQ has no appetite to accelerate its production growth of 5 per cent in 2022, but may elect to reallocate some capital between product types if it makes economic sense to do so,” said Mr. Pardy. “Ramping-up drilling activity in this environment would likely serve to manufacture inflationary pressures. Currently, inflationary pressures are most apparent when it comes to facilities construction given steel and labor input costs. The company has been able to largely off-set higher rig rates with enhanced efficiency (speed), in part because it has level-loaded its drilling & completions program this year.”

Mr. Pardy thinks the company’s investment in its Horizon Oil Sands facility is ”particularly important because it will allow the facility to move from one turnaround every year to one turnaround every two years.”

“CNQ emphasized the value of avoiding one annual turnaround at Horizon because it: (1) saves costs on turnaround activity, (2) reduces operational risks by running Horizon at more stable rates on an annual basis, and (3) otherwise preserves production and therefore revenues. The company mentioned that all of its strategic initiatives are progressing as/better than planned,” he added.

Mr. Pardy said Canadian Natural remains his “favourite” senior producer and reiterated its position on the firm’s “Global Top 30″ list.

“Our bullish stance towards CNQ reflects its strong leadership team, shareholder alignment, long-life low-decline portfolio, free cash flow generation, strengthening balance sheet and best in class operating performance,” he said.

Reaffirming an “outperform” recommendation for its shares, he increased his one-year price target by $5 (or 6 per cent) to $85. The average on the Street is $81.76.

“At current levels, CNQ is trading at a 2022 estimated debt-adjusted cash flow multiple of 4.7 times (vs. our global majors peer group avg. of 4.0 times) and a free cash flow yield of 18 per cent (in-line with our global peer group average),” he said. “In our minds, CNQ should command a premium relative cash flow multiple given its shareholder alignment, long life-low decline portfolio, consistent operating performance, strong balance sheet, free cash flow generation and defined shareholder returns policy.”


With higher fertilizer pricing and potash sales expectations, TD Securities analyst Michael Tupholme raised his estimates for Nutrien Ltd. (NTR-N, NTR-T) on Thursday.

“Crop and fertilizer prices have increased notably since Russia’s invasion of Ukraine in late-February,” he said. “Whereas global grain/oilseeds markets were already relatively tight before the onset of the war, the conflict has created significant uncertainty and is widely expected to further compound pre-existing global agricultural market tightness (note: Russia and Ukraine are the largest and third largest global wheat exporters, respectively, while Ukraine is also a major corn exporter). Meanwhile, global fertilizer prices, which were also already elevated by historical standards before the conflict, have rallied sharply in recent weeks, as the market contends with major supply-disruption risks. Note, Russia accounts for approximately 20 per cent of global potash supply, 23 per cent of ammonia, and 14 per cent of urea, while Belarus (also sanctioned) accounts for a further 20 per cent of global potash supply. Key drivers of recent fertilizer price gains include imposed financial sanctions/potential additional sanctions, higher natural-gas prices, transportation/shipping constraints, and buyer unwillingness to transact with Russian exporters. Since late-February, spot potash prices are up 43 per cent in Brazil and 12 per cent for U.S. MidWest West, while the NOLA urea price is up 42 per cent.”

While raising his estimates “notably,” Mr. Tupholme sees the potential for further upside even with recent fertilizer price gains, particularly for potash given “supply-constraint severity.”

“That said, in developing our forecasts, we assume that peak prices have been reached in most cases and we assume a general decline in prices over our forecast period,” he added.

Keeping a “buy” rating for Nutrien shares, he hiked his target to US$125 from US$91. The average is $106.49.

“Progress towards de-escalation of the Russia/Ukraine conflict could weigh on sentiment towards NTR; however, we believe that fertilizer market supply disruption/tightness is unlikely to be quickly overcome and we expect NTR to generate significant FCF over our forecast period; $9-billion/$7.2-billion in 2022/2023, implying FCF yields of 16 per cent/13 per cent, which we see as attractive,” he said.


Seeing an “improving” outlook for revenue and margins and in response to recent share price depreciation, National Bank Financial analyst Rupert Merer raised his rating for Xebec Adsorption Inc. (XBC-T) to “outperform” from “sector perform” following its Investor Day event on Tuesday.

“XBC is on the right path, with a focus on competitive, containerized product solutions for RNG and hydrogen with near-tern demand,” he said. “The European energy crisis and CCUS markets in North America could further drive growth for these products.”

Mr. Merer said Xebec’s three-year strategic plan, which it expects will drive revenue gains of over 40 per cent annually by 2024, is largely driven by organic growth in its service offerings and cleantech product sales.

“XBC identified Hydrogen, RNG and CCUS markets as the three pillars that should drive equipment sales growth, with visibility on demand,” he said.

“XBC targets $300–$350-million (NBF estimate $300-million) in revenues and an adjusted EBITDA margin of 8–10 per cent (NBF 10 per cent) by fiscal 2024. The service business targets revenue of roughly $150-million, or close to 50 per cent of XBC’s target for 2024E. XBC plans to invest roughly 2 per cent to 3 per cent of revenues into R&D for the next few years, to improve the performance of its systems and to stay competitive. XBC has a $124-million backlog, which could grow with a significant compressor order.”

After a valuation “reset,” Mr. Merer trimmed his target for Xebec shares to $3.25 from $4. The average is $2.99.

“With XBC’s financial goals providing some visibility on our 2024E, we have reset our valuation to 20 times EV/EBITDA on 2024. This multiple is consistent with some of XBC’s high-growth peers in RNG, and below most in electrolysis based on FY2,” he said.

Elsewhere, TD Securities’ Aaron MacNeil cut Xebec to “hold” from “speculative buy” with a $2.50 target, down from $3.


Citing “limited visibility on the timing of profitability along with a lower near-term forecast,” Desjardins Securities analyst Kevin Krishnaratne downgraded BBTV Holdings Inc. (BBTV-T) to “hold” from “buy” previously.

“BBTV reported a mixed 4Q, with Plus momentum building and core RPM growing 17 per cent year-over-year, but platform views were impacted by new consumption trends favouring shortform content that is not yet being monetized,” he said. “Meanwhile, BBTV is ramping investments in Plus and Web3 initiatives that we think will drive adjusted EBITDA losses in 2022 vs prior expectations of breakeven.”

To “reflect evolving content consumption pattern,” Mr. Krishnaratne cut his earnings and revenue expectations for the Vancouver-based company, leading him to reduce his target for its shares to $5 from $12.50. The average is $8.17.


While acknowledging the “risks of revenue of lumpiness” in this early stage of its lifecycle, Echelon Partners analyst Amr Ezzat thinks VOTI Detection Inc. (VOTI-X) presents an “attractive risk-reward characteristics at current levels.”

After the bell on Tuesday, the Montreal-based technology company, which focuses on the development of the latest-generation X-ray security systems, reported revenue of $4.3-million for its first quarter, down 32.2 per cent year-over-year. Adjusted EBITDA fell to a loss of $1-million from a gain of $0.5-million during the same period a year ago.

“In an expectedly difficult quarter, results were hampered by product deferrals to future periods ... We expect an increase in activity levels for the balance of the year, as previously deferred orders begin to get fulfilled,” said Mr. Ezzat. “Namely, we expect moderate sequential growth in FQ222, with a strong pickup in activity in the second half of the fiscal year. Subsequent to quarter end, the Company closed a $2.4-million private placement (15.7 million shares issued at $0.15/unit). The proceeds will be used towards debt repayment and for working capital purposes.”

While he lowered his estimates for VOTI “due to the slower than anticipated recovery,” Mr. Ezzat said he has increased confidence in its products, which he calls “best-in-class,” given the positive EBITDA results in previous quarters and seeing it gaining traction with marquee customers.

“Given the lumpy nature of the business quarter to quarter, we take a longer-term view when evaluating the merits of an investment in VOTI,” he said. “The Company’s 3D Perspective technology and proprietary algorithms create best-in-class image clarity and eliminate blind spots for enhanced threat detection. In addition, VOTI’s remote diagnostic and repair capability minimizes downtime and provides its customers with a reliable security technology. In side by side testing with major competitors, VOTI has been selected on a number of occasions as the technology of choice by end-users. The Company’s superior product is evidenced by its client roster. Notable recent deployments and wins include Amazon’s North American fulfillment centres, the US Air Force, Ports America (the largest terminal operator and stevedore in the US), Carnival Cruise Lines, Madison Square Garden, US Bank Stadium, and Bell MTS Place (home to NHL team Winnipeg Jets).”

Reaffirming a “speculative buy” recommendation, he cut his target to 35 cents from 80 cents. The average is 38 cents.


Believing it is “turning the corner,” Scotia Capital analyst Scott Macdonald upgraded Mountain Province Diamonds Inc. (MPVD-T) to “sector perform” from “sector underperform,” seeing “buoyant diamond prices ease balance sheet concerns.”

The move came after the Toronto-based miner released a technical report on its Gahcho Kué Mine, which Mr. MacDonald deemed “solid.”

“In our view, the significant improvement in rough diamond prices over the past few months significantly reduces the company’s near-term balance sheet risks, and overall we see MPVD’s risk/reward profile as much more balanced,” he said.

“While the company still needs to address the upcoming US$300-million bond maturity (December 2022), we are much more confident the company can do so in a shareholder-friendly manner in today’s strong diamond market environment. Furthermore, it is positive to see the new management team focusing on long-term strategic planning and opportunities to add value after a long period of firefighting various liquidity and operational crises.:

After updating his financial model to reflect the new LOM plan and the “improved” diamond market, the analyst raised his target for Mountain Province shares to $1.10 from 15 cents. The average is $1.03.

“We are currently in a period of heightened volatility and uncertainty in the diamond market, particularly with respect to the (as yet unknown) net impact of sanctions on Russian diamond producers, which represent about 30 per cent of global production,” said Mr. MacDonald. “We have chosen to err on the conservative side with our pricing assumptions given this uncertainty but believe the risk to our price estimates is biased to the upside. We continue to assume diamond prices increase by 2 per cent annually after 2022 (on a real basis) supported by favourable long-term supply/demand fundamentals.”


In other analyst actions:

* With its “strong” share price performance since December having pushed it to a premium valuation versus its peers, TD Securities’ Jonathan Kelcher downgraded Tricon Residential Inc. (TCN-N, TCN-T) to “hold” from “buy” with a US$18 target, rising from US$16 and above the US$16.84 average.

“So, although we continue to like the U.S. SFR industry and believe that TCN is well-positioned to benefit from the favourable fundamentals, the current valuation level makes it difficult to justify a Buy rating,” he said. “That said, we would not hesitate to upgrade Tricon to Buy on any share-price pullback.”

* Desjardins Securities analyst Chris MacCulloch raised his target for Advantage Energy Ltd. (AAV-T) to $12 from $10.50, keeping a “buy” rating. The average target on the Street is $11.02.

“We continue to highlight AAV as our top pick in the Canadian energy sector as we still believe that investors are receiving a costless option on Entropy at current levels. Going forward, we see the federal government’s introduction of ITCs for CCS projects and AAV’s impending stock buyback program as two major catalysts for the stock,” he said.

* Following “solid” fourth-quarter results and a dividend raise, Desjardins Securities’ Gary Ho bumped up his target for AGF Management Ltd. (AGF.B-T) to $10.75, above the $9.04 average, from $10 with a “buy” rating.

“We foresee a few near- or medium-term positive catalysts: (1) retail net sales momentum; (2) redeploy capital for organic growth, seed new private alt strategies and share buybacks; (3) growth in fees/earnings from its private alt platform; (4) execution on SG&A cost reduction to improve EBITDA and EBITDA margins; and (5) DSC ban benefiting FCF and EPS,” he said.

* TD Securities’ Brian Morrison raised his Aimia Inc. (AIM-T) target to $7.50 from $7, maintaining a “buy” raitng. The average is $7.67.

“We see tremendous value in Aimia at the current share price. That stated, we believe that the share price will remain relatively range-bound until such time as the proceeds from the PLM transaction are received. This, in our view, is the next potential catalyst for the share price,” he said.

* Following Wednesday’s Investor Day event, Cowen and Co. analyst Helane Becker cut her Air Canada (AC-T) target to $29 from $32 with an “outperform” rating, while Canaccord’s Matthew Lee cut his target by $1 to $26 with a “hold” recommendation. The average is $29.72.

“Air Canada held an Investor Day yesterday, wherein the company articulated its near-medium-term strategy as well as its F22-F24 guidance,” he said. “Overall, the outlook was largely in line with our expectations except for F22 EBITDA margins, which were lower than our forecast due to elevated fuel costs. On the positive side, management’s commentary reinforces our view that the company is exceptionally well-positioned for a travel recovery and now has a fleet that is likely more efficient than ever before. We came away from the presentation remaining positive on AC’s long-term prospects within the passenger and cargo markets but lowered our EBITDA estimates based on increased fuel costs. As a result of our decreased estimates, our price target is reduced.”

* BMO’s Devin Dodge raised his target for Brookfield Infrastructure Partners LP (BIP-N, BIP.UN-T) to US$71, exceeding the US$68.33 average, from US$66 with an “outperform” rating.

“We believe there is an attractive setup for BIP including strong FFO/unit growth, upside to distribution growth, an active M&A pipeline and significant resources to pursue deals. The units have been strong of late but we continue to see a favourable risk/reward,” he said.

* Canaccord Genuity’s Doug Taylor cut his Farmers Edge Inc. (FDGE-T) target to $3.50 from $4.50, keeping a “hold” rating, while Raymond James’ Steve Hansen cut his target to $4.50 from $6 with a “market perform” rating. The average is $3.73.

“We are reducing our target price ... and maintaining our HOLD rating on Farmers Edge after the company reported significant top- and bottom-line Q4 misses on Friday, including another quarter of accelerating cash burn,” he said. “The $75-million liquidity increase provided by Fairfax provides additional breathing room. However, the CEO transition and uncertain outlook for F2022 given the company’s current cash burn does not provide significant confidence with which to recommend investors revisit this name despite a precipitous drop in the share price. We recommend investors wait for a better line-of-sight to growth reacceleration and narrowing cash burn before considering adding to positions in FDGE.”

* Cowen and Co.’s John Kernan raised his Lululemon Athletica Inc. (LULU-Q) target to US$507 from US$491 with an “outperform” rating. The average is US$427.57.

* Believing its “poised for better results” in 2022 and anticipating the closing of its Shaw acquisition, National Bank Financial’s Adam Shine raised his target for Rogers Communications Inc. (RCI.B-T) shares to $77 from $74 with an “outperform” rating. The average is $72.47.

* Raymond James’ Brian MacArthur bumped up his target for Teck Resources Ltd. (TECK.B-T) to $58 from $52 with an “outperform” rating. The average is $54.76.

" We have updated our 2022 forecasts to reflect higher coal prices given strong market conditions as well as our oil team’s new price forecasts. For 1Q we have also updated our forecasts for quarterly prices as well as our expectation that coal sales will likely be toward the lower end of guidance. In addition, we note 1Q should benefit from positive provisional pricing,” he said.

* Echelon Partners’ Andrew Semple reduced his target for shares of Trulieve Cannabis Corp. (TRUL-CN) to $55 from $60, reiteraiting a “buy” rating. Others making changes include: ATB Capital Markets’ Kenric Tyghe to $65 from $70 with an “outperform” rating, Canaccord’s Derek Dley to $65 from $70 with a “buy” rating, Stifel’s Andrew Partheniou to $125 from $135 with a “buy” rating, Alliance Global Partners’ Aaron Grey to $60 from $76 with a “buy” rating and BTIG’s Camilo Lyon to $72 from $62 with a “buy” rating. The average is $70.

“Trulieve Cannabis Corp. announced Q421 results slightly below estimates, but which we view as roughly in line with expectations given the slow quarter for U.S. cannabis,” he said. “The quarter represents the first contribution from the Company’s acquisition of Harvest Health & Recreation Inc. completed on October 1, 2021. Trulieve grew revenues 36 per cent quarter-over-quarter on the back of the acquisition, though adj. EBITDA grew just 3 per cent sequentially on pricing and margin pressures, as well as temporary inefficiencies around closing the transaction.”

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