Inside the Market’s roundup of some of today’s key analyst actions
Calling its first-quarter earnings report as a “strong positive,” ATB Capital Markets analyst Patrick O’Rourke now sees a “compelling” capital return outlook for Cenovus Energy Inc. (CVE-T) .
Shares of the Calgary-based company soared 10.3 per cent on Wednesday following the premarket release, outperforming the 3.4-per-cent increase for the TSX Energy Capped Index.
“Upstream operations, particularly at Foster Creek and Christina Lake, demonstrated continued strong production profiles, and U.S downstream contributed an impressive $423-million in operating margin in the quarter (relative to a loss of $97-million in Q4/21) on the back of strong crack spreads and improving efficiencies,” the analyst said.
Cenovus reported cash flow per share of the quarter of $1.30, beating the consensus expectation on the Street by 20.4 per cent ($1.08). Upstream production rose to 798,600 barrels of oil equivalent per day from 769,254 boepd a year earlier, in line with the 800,000-barrel forecast.
The company also announced its base dividend will increase from 14 cents per share to 42 cents annually, beginning in the second quarter of this year.
“While the Company did recognize some higher costs in guidance across the capital and operating structure as expected (particularly with $300-million related to the Superior refinery rebuild), we continue to believe that the impact of strong pricing and operations will have an outsized relative effect on the FCF profile (and higher cash costs already previously considered in our forecast),” said Mr. O’Rourke.
“Finally, the Company continued its commitment to shareholder returns, tripling the base dividend to 42 cents (implied 1.8-per-cent yield on current closing price of $23.27) and codifying a framework that will emphasize a further 50 per cent of FCF targeted to share buybacks (with the remainder of the 50 per cent to variable dividends) at debt levels below $9-billion, increasing to 100 per cent of FCF at debt levels below $4-billion. Our model projects that under our current pricing and operational scenario, CVE will hit its $4-billion net debt target in H1/23 on the back of $2.8-billion in incremental capital returns (above the core dividend) for the balance of 2022.”
Maintaining an “outperform” recommendation for Cenovus shares, the analyst raised his target to $33 from $31. The average on the Street is $26.63.
“CVE currently offers the second highest upside of the Oil Sands group to our intrinsic NAV-based price target, at 44 per cent, while we see an average upside of 27 per cent for the group, a key driver of our outperform rating,” said Mr. O’Rourke. “The focus on Cenovus’ merger with Husky was on improving market access and integrating its operations from the wellhead to the refinery. Cenovus is now focused on the $1.2-billion in identified cost structure savings and the project high gradings that were laid out in the merger announcement, and given the confidence and execution that CVE has been conveying, we believe there is further potential upside, though broader economic inflationary pressures may limit that. In addition, we continue to believe there is plenty of opportunity to improve upon the prior existing and Husky-acquired assets (most visibly through the margin enhancing integration of Foster Creek/Christina with Husky’s Lloydminster upgrader). Finally, we have been highlighting that CVE is also best positioned for asset rationalization that accelerates debt repayment and the path to shareholder returns relative to peers; with the announcement of the sale of the Husky retail network, Wembley assets, and the Tucker disposition, CVE announced dispositions in 2021 more than $1.9-billion and has now provided a clear return of capital framework and accelerated its return of capital (dividend tripled with Q1/22 reporting.”
Elsewhere, other analysts making target adjustments include:
* RBC Dominion Securities ‘ Gregory Pardy to $28 from $27, keeping an “outperform” rating.
“Our bullish stance towards Cenovus reflects its capable leadership team, strengthening balance sheet, stern capital discipline, favorable operating momentum and rising shareholder returns—including tripling its common share dividend,” said Mr. Pardy.
“Cenovus remains our favorite Canadian integrated producer and is on our Global Energy Best Ideas list.”
* BMO Nesbitt Burns’ Randy Ollenberger to $30 from $26 with an “outperform” rating.
“We continue to see solid value in Cenovus’ shares as the company has one of the best portfolios of long-life, low-decline oil sands assets. Due to its leverage to improving commodity prices and continued operational strength, we believe Cenovus is well positioned to generate prodigious levels of free cash flow, which could allow the company to reach its net debt target of $4 billion and expanded shareholder return framework in early 2023,” said Mr. Ollenberger.
Seeing “smoother seas ahead” for First Quantum Minerals Ltd. (FM-T), Canaccord Genuity analyst Dalton Baretto raised his rating for its shares to “buy” from “hold.”
“We like FM for its scale, leverage to copper, relatively low cost structure and organic growth pipeline,” he said. “Given the operating challenges in Q1, management made a prudent decision to ‘bite the bullet’ and adjust production and cost guidance, which we believe significantly de-risks the company’s performance vs. expectations over the rest of this year.”
Shares of the Toronto-based miner gained 5.1 per cent on Wednesday with the premarket release of better-than-anticipated first-quarter results. Revenue of $2.163-billion and earnings per share of 70 cents topped the estimates of both Mr. Baretto ($2.087-billion and 62 cents) and the Street ($2.065-billion and 57 cents).
“A challenging quarter operationally, with weather and COVID-19 related issues exacerbated by external inflationary pressures,” he said. “Copper production was in line with our estimate, but below consensus, while costs were above Street forecasts. In addition, the company reduced copper production guidance and increased cost guidance for the year. Despite the operating challenges, however, FM beat our and consensus financial estimates on higher sales volumes out of Zambia.”
“The most significant impact to Q1 production at all three primary assets – Cobre Panama, Kansanshi and Sentinel – appears to be access to planned grades, albeit for varying reasons. At Cobre Panama and Sentinel, fleet availability was an issue given lingering impacts of COVID-19 on the maintenance program, an issue that will be resolved over the next few months. At Kansanshi and Sentinel, heavy rains over Q1 and into April have limited access to planned areas of the pit; with incremental de-watering plans and the onset of the dry season this issue will likely be alleviated. As such, we forecast a rising copper production profile along with a declining unit cost profile over the rest of 2022″
Mr. Baretto maintained a target of $44 for First Quantum shares. The average on the Street is $43.17.
Other analysts making target adjustments include:
* National Bank Financial’s Shane Nagle to $46 from $48 with an “outperform” rating.
“The Q1 headline beat was somewhat overshadowed by reduction in Kansanshi production guidance and magnitude of 2022 cost guidance increase (which was well telegraphed leading up to the quarter),” said Mr. Nagle. “The market continues to await a final ratified tax/royalty framework in Panama and potential deductibility of mineral royalties for tax purposes in Zambia — both are expected to provide more certainty in long-term operating assumptions.”
* RBC Dominion Securities’ Sam Crittenden to $42 from $43 with an “outperform” rating.
“FM can continue to generate strong FCF (we estimate an 11-per-cent FCF yield at spot) despite rising input costs, and we expect improving production as the year progresses. This can further de-lever the balance sheet and fund organic growth projects and increased shareholder returns,” he said.
* JP Morgan’s Patrick Jones to $45 from $46 with an “overweight” rating.
National Bank Financial analyst Jaeme Gloyn sees the P&C Insurance sector remaining “well positioned” for 2022, citing “persistent hard market conditions and rising interest rates that support improved investment income.”
In a research report released Thursday, he reaffirmed his view that “pricing trends will continue to outpace loss cost trends overall, even for Personal Auto lines as driving behaviour has yet to complete its path to normalization and auto repair/parts price increases still lag U.S. trends.”
“FFH (up 10 per cent) and IFC (8 per cent) are two of the top three performing stocks in the S&P/TSX Financials Index year-to-date,” said Mr. Gloyn. If DFY (up 13 per cent) were included in the index, it would be THE top performing Financial stock. While our top pick in the sector, TSU (down 33 per cent), has lagged considerably following a profit hiccup in Q4-21 results, we expect solid Q1-22 results to set the stock back on an upward trajectory .. We view TSU’s current trading multiple as unduly cheap.”
The analyst believes “there’s something for everyone” in the sector, pointing to Trisusa Group Ltd. (TSU-T) and Definity Financial Corp. (DFY-T) for small-to-mid-cap growth and Fairfax Financial Holdings Ltd. (FFH-T) and Intact Financial Corp. (IFC-T) for large-cap value or growth-at-a-reasonable price (GARP).
“That said, the lines of value, GARP, and even momentum, are blurring,” he said. “TSU remains at the top of our pecking order given a rapid growth outlook but is also an attractive value play with upside to specialty insurance peers. Although one of the best performing Financials stocks year-to-date, FFH remains the best value idea in our coverage. But, FFH also offers investors rapid top-line growth and leverage to a higher interest rate environment. As it relates to IFC and DFY, we continue to believe share price acceleration is contingent on proof of execution. We see no reason to adjust our view that both companies will continue to deliver: IFC on integration of RSA and DFY on its strategic growth objectives.”
Mr. Gloyn made a pair of target changes in the note:
* Definity (DFY-T, “outperform”) to $37 from $36. The average on the Street is $36.09.
“DFY is a land grab story with an ROE expansion kicker. While the current trading multiple of approximately 1.6 times P/B appropriately values this growth and ROE upside story today, we expect continued solid execution will gradually drive the valuation multiple higher,” he said.
* Trisura (TSU-T, “outperform”) to $65 from $58. Average: $53.71.
“We reiterate that significant valuation upside remains as i) the U.S. fronting platform continues to prove out its industry-leading growth trajectory and expands its share of TSU profitability and ii) Canada boasts strong momentum as market share gains, new products and persistent hard markets support equally impressive growth,” he said.
Mr. Gloyn maintained his $1,000 target for Fairfax Financial (FFH-T, “outperform”) and $225 target for Intact Financial (IFC-T, “outperform”). The averages are $864.76 and $208.67, respectively.
Elsewhere, Desjardins Securities’ Doug Young raised his Definity target to $37 from $33 with a “buy” rating.
“While we expect decent 1Q22 results for both Intact Financial (IFC) and Definity (DFY), normalizing conditions (ie increased driving) likely resulted in higher combined ratios, lower operating earnings and lower ROEs vs 1Q21,” he said. “Both companies’ stocks have outperformed the banks and lifecos so far in 2022, and both names provide defensive characteristics in what’s proving to be a tough macro environment. Besides the normal areas, the big focus will be on what impact inflationary pressures are having, and are expected to have, on results.”
Ahead of the May 4 release of its quarterly results, RBC Dominion Securities analyst Irene Nattel reiterated her “constructive” view on Loblaw Companies Ltd. (L-T)
“Loblaw is well positioned against the backdrop of accelerating food inflation, benefiting from prior period price investments and preferential relative exposure to the discount channel as consumers pivot to value,” she said. “Survey data reinforce our view that Loblaw should disproportionately benefit from its sector-leading private label offering and loyalty program as consumers seek value to offset higher pricing.”
Ms. Nattel is projecting first-quarter earnings per share of $1.28, up 13 per cent year-over-year and in line with $1.30 consensus.
“Momentum in discountis accelerating with rapidly rising inflation, as consumers actively seek value to offset higher prices,” she said. “Loblaw has multiple tools that serve the company well in this environment: a network that over-indexes to discount (60 per cent), the leading loyalty program in Canada and a private label offering that includes deep value No Name, recently rejuvenated and highlighted in store.”
“Loblaw is effectively leveraging PC Optimum across food and pharmacy, delivering consumer value beyond traditional flyer pricing, driving loyalty, improving engagement, and sustaining gross margin gains notwithstanding significant supply chain disruptions and vendor price increases. In our view, Loblaw is still in the early innings of leveraging loyalty data and delivering personalized value to its customers. The company also enjoys unparalleled price discovery through its President’s Choice and No Name brands, helping inform vendor pricing negotiations.”
Keeping an “outperform” rating, she hiked her target for its shares to $133 from $120. The average on the Street is $118.20.
Conversely, Ms. Nattel trimmed her targets for these stocks:
* Maple Leaf Foods Inc. (MFI-T, “outperform”) to $42 from $43. Average: $40.50.
“Late Q4 headwinds carried forward intoQ1, but pricing initiatives in late Q1/early Q2 and (hopefully) a normalizing labour backdrop should improve go forward trends,” she said. “Forecasting transient decline in Meat Protein EBITDA margin due to absenteeism, supply chain disruptions, and inflation. In Plant Protein, we do not expect meaningful change in approach and segment contribution for the current quarter, although we may get greater clarity on the path forward in conjunction with Q1 results.”
* Saputo Inc. (SAP-T, “outperform”) to $35 from $37. Average: $35.88.
“Operating conditions are likely to remain challenging over the next 6-12 months, but market conditions improving in April, earnings recovery should accelerate through fiscal 2025 as elements of the strategic plan take shape and plant upgrades come online,” she said. “Our fiscal 2025 estimates is more conservative than management target $2.125-billion, but relief on labour and supply chain headwinds, and normalizing commodity backdrop in the U.S. could drive upside to our numbers.”
With coal prices continuing to rise, Citi analyst Alexander Hacking hiked his 2022 earnings before interest, taxes, depreciation and amortization (EBITDA) projection for Teck Resources Ltd. (TECK.B-T) by 40 per cent on Thursday.
The move came in reaction to higher price forecasts from the firm’s global commodity team, including met coal at $365 per ton and copper at $4.60 per pound, as well as a “generally positive” conference call following the release of its quarterly results.
“It seemed virtually inconceivable 3 years ago that Teck could be reducing debt & returning capital whilst building QB2 but here we are thanks to coal prices,” said Mr. Hacking. “TECK stock responded very positively to results today although we did not see much that was new (maybe expectations had been lowered more than we realized). Executing QB2 is the key for 2022 with important work still to progress.”
Keeping a “buy” rating for Teck shares, which jumped 11.7 per cent on Wednesday, the analyst raised his target to $58 from $52. The average target is $59.46.
“Investment positives include a solid portfolio of mining assets including the world’s second biggest export met coal business; growth in copper; a strong balance sheet; increased capital returns in recent years. Negatives include risk of lower met coal demand in future; a history of questionable M&A and dual class share structure. On balance we see more upside than downside at current levels,” said Mr. Hacking.
Elsewhere, others making target changes include:
* Scotia Capital’s Orest Wowkodaw to $65 from $64 with a “sector outperform” rating.
“TECK reported strong Q1/22 results,” he said. “2022 production guidance was reaffirmed although cost guidance in coal was increased by 5 per cent, in line with our expectations. Given windfall HCC prices and construction of the QB2 Cu project nearing completion, the board approved an incremental US$500-million share buyback, essentially doubling the planned 2022 shareholder return to $1.3-billion. Overall, we view the update as positive for the shares.
“We rate Teck shares SO as we anticipate the impending portfolio transformation and return to material positive FCF to drive a meaningful re-rating in the shares over the next 12-24 months.”
* RBC’s Sam Crittenden to $61 from $52 with an “outperform” rating.
“Teck’s key commodities (met coal, copper, zinc, oil) remain at or near all-time highs and this enables excess cash to be generated and returned to investors. We believe this can continue throughout 2022 followed by copper production growth in 2023,” he said.
* Canaccord Genuity’s Dalton Baretto to $53 from $54 with a “hold” rating.
“We like TECK for its scale, commodity diversity, asset quality, copper growth pipeline, strong balance sheet and robust capital return program; in addition, we note that the company is nearing a significant cash flow and portfolio inflection point as the large QB2 copper project approaches completion. However, in our view, this scenario is largely priced into the shares, which we feel remain vulnerable to a potential decline in very elevated coking coal prices,” said Mr. Baretto.
* Barclays’ Matt Murphy to $54 from $55 with an “equal-weight” rating.
National Bank Financial analyst Vishal Shreedhar expects “evolving” consumer demand to be in focus when Sleep Country Canada Holdings Inc. (ZZZ-T) reports its first-quarter results on May 4, seeing signs of “growing uncertainty” amid heightened inflation and the economic reopening.
“Recall last quarter management indicated a slowdown in demand for the lower-end of the market (higher than $1,000 price point), offset by ongoing strength in the mid-to-high-end,” he said. “Our understanding is that pervasive inflation and slowing macro-indicators may have begun to negatively impact price-sensitive consumers.
“Our review of management commentary from select U.S. peer retailers indicates softening demand, coinciding with the war in Ukraine (last quarter, Sleep Country noted a similar softening early Q1 trend). Specifically, Sleep Number indicated a 3-per-cent year-over-year decline in Q1 demand, citing low consumer confidence (impacted by rapid inflation), higher input cost pressures and greater geopolitical uncertainty (war in Ukraine), in addition to constrained supply of semiconductor chips for its smart beds.”
Emphasizing the presence of “signs of tapering momentum, albeit with mixed indications,” Mr. Shreedhar expects momentum to “fade” sequentially for the retailer.
“We consider forecasting to be particularly challenging given many confounding factors such as: retail store restrictions, heightened e-Commerce penetration, sequentially tapering housing data, positive year-over-year mattress wholesaler data, tapering consumer confidence trends and still relatively solid consumer financial health,” he said.
The analyst is projecting earnings per share of 32 cents, up from 26 cents a year ago and ahead of the Street’s forecast by 4 per cent. He said that gain will reflect positive same-store sales growth and a higher gross margin rate.
“While ZZZ faces industry-wide pressure (inflation, supply chain, labour), our view is that it is managing well given: (1) A variable compensation structure for store employees; (2) A diversified accessory product portfolio; (3) Proactive supply chain management, supported by two new distribution hubs; (4) Improving omni-channel capabilities; and (5) Price increases, where required,” said Mr. Shreedhar. “Over the medium term, ZZZ is well positioned given various initiatives, including: (a) Investments in digital infrastructure (e.g., the ERP system); (b) Opening more than 6 new stores (2022); (c) Expanding through strategic partnerships and innovation.”
Keeping a “sector perform” recommendation for Sleep Country shares, he cut his target to $33 from $41. The average is $39.29.
“While we note solid trends throughout most of the pandemic, the uncertain outlook and the likelihood of demand being pulled forward keep us on the sidelines,” he said.
Emphasizing its generating an “attractive” yield in an “uncertain economic environment,” Canaccord Genuity analyst Christopher Koutsikaloudis initiated coverage of Firm Capital Mortgage Investment Corp. (FC-T) with a “buy” recommendation on Thursday.
“Firm Capital Mortgage Investment Corp. (Firm Capital MIC) is a non-bank lender, which owns a portfolio of 224 short-term mortgages and other real estate debt investments totaling $642 million,” he said. “The weighted-average interest rate of the MIC’s portfolio stood at 7.9 per cent as of Q4/21, which supports an attractive dividend yield of 7.2 per cent based on the current share price. As a Mortgage Investment Corporation (MIC), Firm Capital MIC is required to distribute substantially all earnings to shareholders as dividends to maintain its tax-exempt status and, therefore, dividend income is the primary source of returns for shareholders over the longer term.
“The MIC is externally managed by the Firm Capital Corporation, which has a strong track record of successful real estate debt and equity investments. While we forecast Firm Capital MIC’s balance of loans outstanding will be relatively stable at $600-million through the end of 2023, the MIC has $66-million of unused capacity on its credit facilities, which could be used to fund growth.”
Mr. Koutsikaloudis set a target of $15, which is $1 below the consensus.
“We believe Firm Capital MIC should continue to trade at a premium to book value over the long term given its asset manager’s strong relationships with borrowers, robust origination volumes and solid historical underwriting track record,” he added.
In other analyst coverage:
* Following Wednesday’s post-market earnings release, Scotia Capital’s Konark Gupta cut his Canadian Pacific Railway Ltd. (CP-N, CP-T) target to $105 from $106 with a “sector outperform” rating, while Stephens’ Justin Long lowered his target to US$76 from US$84 with an “equal-weight” rating. The average is US$84.17.
“CP posted an 10-per-cent miss on Q1 EPS due largely to a significant OR [operating ratio] deterioration as the quarter was full of challenges (Omicron, supply chain, weather, labour, and fuel),” said Mr. Gupta. “However, management remains upbeat on 2H outlook across all segments while pricing remains solid, which should bring the OR back to normal in the next quarters. Although the issues were well-known and were mostly priced in already, we expect a negative reaction today as CP missed beaten-down expectations (actually missed original expectations from late-January by 20 per cent). We would tactically take advantage of stock’s weakness as our outlook has changed only modestly, given the growth opportunity set remains strong organically and inorganically. We also continue to see a high probability of KCS merger approval and realization of long-term synergies, although the regulatory process has shifted to the right by up to three months. We continue to view CP as a 2H story based on our fundamental outlook and KCS approval timing.”
* While its quarterly results exceeded his expectations, RBC’s Paul Treiber cut his CGI Inc. (GIB.A-T) target to $120 from $127, below the $123.93 average, on peer valuation multiple compression with an “outperform” rating. Others making changes include: , BMO’s Thanos Moschopoulos to $120 from $128 with an “outperform” rating and Canaccord Genuity’s Robert Young to $120 from $130 with a “buy” rating.
“Historically CGI has created the majority of shareholder value through acquisitions. We believe that an accelerated pace of acquisitions, sustained positive organic growth, continued margin expansion and resilient FCF could improve investor sentiment on CGI’s shares,” Mr. Treiber said.
* Wells Fargo’s Praneeth Satish raised his targets for Enbridge Inc. (ENB-T, “overweight”) to $64 from $58, Gibson Energy Inc. (GEI-T, “underweight”) to $23 from $20, Keyera Corp. (KEY-T, “equal weight”) to $33 from $31 and Pembina Pipeline Corp. (PPL-T, “equal weight”) to $51 from $46. The averages are $58.95, $25.56, $35.57 and $49.90, respectively.
* Scotia’s Phil Hardie cut his First National Financial Corp. (FN-T) target to $40 from $42, keeping a “sector perform” rating. Others making changes include: BMO’s Étienne Ricard to $38 from $43 with a “market perform” rating and TD Securities’ Graham Ryding to $37 from $42 with a “hold” rating. The average is $41.67.
“Despite stronger-than-expected mortgage origination volumes, First National’s (FN) first-quarter core earnings results fell short of expectations,” Mr. Hardie said. “We were pleased with the stronger-than-expected volumes across the single-family segment, but continue to expect volumes to decline given increasing macro uncertainties coupled with a transitioning housing market. With volumes expected to decline, earnings derived from the company’s Mortgages Under Administration and portfolio of securitized mortgages are likely to be increasingly important sources of growth.
“Management’s expectation for 2022 is moderately lower originations resulting from the current rising rate cycle, which is dampening affordability and housing activity. The team noted a market slowdown in home purchasing seems inevitable due to pent-up activities in the last 24 months. On commercial, FN continues to anticipate strong activities in the short term, but cautioned against the potential future rate hikes.”
* CIBC’s Scott Fromson lowered the firm’s rating FirstService Corp. (FSV-Q, FSV-T) to “neutral” from “outperformer” and reduced his target to US$145 from US$175 after assuming coverage of the stock. Other changes include: Raymond James’ Frederic Bastien to US$175 from US$200 with an “outperform” rating and BMO’s Stephen MacLeod to US$152 from US$175 with a “market perform” rating. The average is US$160.
“We see FSV as a high-quality, well-managed and diversified growth vehicle, with exposure to stable property management and residential service businesses. However, we think the stock price largely reflects these strong growth prospects,” said Mr. Fromson.
* Citi’s Prashant Rao raised his Imperial Oil Ltd. (IMO-T) target to $69 from $47, above the $64.05, average after the firm increased its 2022 oil price forecast. He kept a “buy” rating.
* Raymond James’ Brian MacArthur cut his Labrador Iron Ore Royalty Corp. (LIF-T) target to $42 from $43.50 with a “market perform” rating. The average is $52
* BMO’s John Gibson cut his North American Construction Group Ltd. (NOA-T) to $24 from $26, below the $27.90 average, with an “outperform” rating.
“NOA’s Q1/22 results were modestly light of expectations, mostly due to some worker-related downtime in January. That said, financial results were solid in light of these challenges, while NOA’s $215-245 million 2022 EBITDA guidance remains unchanged. We continue to view NOA in a positive light given its stable oil sands operations and growing diversification. Post quarter we are tweaking our estimates lower,” said Mr. Gibson.
“Q1/22 cell phone data suggests the three main banners all experienced year-over-year U.S. traffic declines. This is the first quarter of cell phone mobility declines since Q1/21 and comes after only three quarters of rebounding traffic gains. We are uncertain if the declines were due to inflation or if foot traffic had reached its peak post-pandemic, or perhaps a bit of both. Tim’s Canada may be the only bright spot with app traffic boosted by “Roll Up To Win”,” he said.
* CIBC’s Todd Coupland cut his target for Shopify Inc. (SHOP-N, SHOP-T) to US$460 from US$850 with a “neutral” rating, while DA Davidson’s Tom Forte reiterated a “neutral” rating but placed his target (previously US$800) under review ahead of the May 5 release of its first-quarter results. The current average is US$900.56.
“Prior to writing our preview, we read management’s comments from its 4Q21 earnings call,” said Mr. Forte. “We compared them against our other covered companies that announced plans to increase investment spending, such as Roku and Wayfair. Given Shopify’s management’s comments that it plans to reinvest ALL gross profits back into the business and Wayfair’s that its own investment spending is expected to result in flat adj. EBITDA for 2022, we have decided to make a similar assumption for Shopify that it too would have flat adj. EBITDA for 2022, including 1Q22. Considering the consensus projections for 1Q22 (positive $136-million) and full-year 2022 ($547-million), we acknowledge the possibility that either we are misinterpreting management’s outlook or the Street is meaningfully over-optimistic on near-term profitability.”
* Wells Fargo’s Ned Baramov hiked his TC Energy Corp. (TRP-T, “equal weight”) to $74 from $68. The average is $71.53.
* National Bank Financial’s Rupert Merer raised his TransAlta Renewables Inc. (RNW-T) target to $19 from $18.50 with a “sector perform” rating. The average is $18.50.
* BMO’s Jonathan Lamers raised his Uni-Select Inc. (UNS-T) target by $1 to $36 with an “outperform” rating. The average is $33.50.
“Improving refinish paint market trends should support stronger sales for the core FinishMaster refinish paint distribution business in the upcoming Q1,” said Mr. Lamers. “The stock’s valuation has recovered to a level within the range of peers. Regardless, we continue to see compelling upside driven by earnings growth as new management improves operations, collision repair end-market demand gradually recovers, and tuck-in acquisitions resume.”