Inside the Market’s roundup of some of today’s key analyst actions
Yelp Inc. (YELP-N) reported disappointing first-quarter results and guidance for 2019 and that has led Citi to downgrade the stock.
“We are downgrading Yelp shares to ‘neutral’ from ‘buy’ following disappointing 1Q19 and CY19 guidance. Despite solid 4Q18 results, in-line margin guidance for CY19, management’s new bullish (optimistic?) long-term targets, incremental buyback authorization and changes to the Board, the topline outlook points to more challenging near-term business conditions than we expected (for example, 4 per cent to 6 per cent revenue growth in 1Q versus 10 per cent to 12 per cent estimates),” said analyst Mark May.
He also lowered his price target to US$40 from US$42. The median is US$37, according to Zack’s Investment Research.
“We note that if the company is able to reaccelerate growth in 2020 (as its new goal suggests) and it is able to achieve its 2023 targets of mid-teens revenue CAGR [compound annual growth rate] and 30 per cent to 35 per cent EBITDA margin, there would be meaningful upside to our and consensus forecasts. That said, current business trends do not support that outlook in our view.”
BMO Research is worried about the prospects for Nemaska Lithium Inc. (NMX-T) and downgraded the stock and cut its price target after the company gave an update on its Whabouchi mine and electrochemical plant.
Analyst Joel Jackson lowered his rating on the stock to “market perform” (speculative) from “outperform” and cut his target price to 50 cents from $1.45.
“There could be strong upside over two to three years if NMX can successfully build and scale its innovative integrated hydroxide operation. In such a scenario, the stock should re-rate closer to our NAV [net asset value] of about $1 per share (lowered from $1.45 per share), and could even see $2 per share upside under more bullish scenarios,” the analyst said.
“However, considering recent execution, concerns over future missteps, and the likely low negotiating power NMX possesses to raise the additional required funding, we are unable to stay constructive on NMX,” he said.
Eight Capital also cut its target price to $1.40 from $2.50.
Birchcliff Energy Ltd. (BIR-T) reported strong fourth quarter earnings and raised its dividend, and BMO Research is positive on the stock.
“Birchcliff delivered a loaded fourth-quarter release that included cash flow above expectations, a fine-tuned 2019 capital budget, 2018 reserves, and a 5 per cent dividend increase beginning in the first quarter of 2019,” said analyst Randy Ollenberger.
“We believe the shares are undervalued but the near-term macro backdrop remains challenging,” he said.
He kept his “market perform” rating on the stock and raised his target price to $4.25 from $4. The median is $6.62.
National Bank of Canada also raised its price target to $6.75 from $6 and Eight Capital raised its target price to $4.75 from $4.50.
Constellation Software Inc. (CSU-T) reported strong fourth quarter results and issued a $20 per share special dividend and BMO Research raised its price target.
“We recently upgraded the stock based on our increased comfort that Constellation can sustain a level of EBITDA [earnings before interest, taxes, depreciation and amortization] and cash flow growth that would make the stock attractive at its current valuation,” said analyst Thanos Moschopoulos.
The company’s strong fourth quarter results “in our view, provide further support to our thesis,” he said.
He kept his “outperform” rating and raised his target price to $1,200 from $1,140. The median is $1,000.
CIBC Research is also positive on the stock.
“Constellation reported strong fourth quarter results and announced a $20 per share ($424 -million) special dividend. We continue to see Constellation as well positioned in the current M&A environment, with acquisition spending reaching an all-time high in 2019. Constellation typically funds its M&A out of free cash flow, with the company accumulating excess net cash on its balance sheet over the past several years ($435-million ex-debentures at the end of the fourth quarter). We see the special dividend as a return of this excess cash to shareholders and have not changed our 2019 M&A expectations. We continue to view Constellation as best-in-class capital allocators and retain our Outperformer rating and $1,250 price target,” said analyst Stephanie Price.
With the headline that “Hatchimals runs out of steam” Canaccord Genuity has cut its rating and target price for Spin Master Corp. (TOY-T).
“Spin Master released preliminary Q4/18 gross product sales on Wednesday evening which were below our expectations. Importantly, gross product sales at the Remote Control and Interactive Characters segment declined 46% YoY to $108 million, mainly due to the performance of Hatchimals large eggs. This marks the third consecutive quarter of declining sales within the segment, and we expect declining Hatchimal sales to continue to challenge the segment throughout 2019,” said analyst Derek Dley.
“Furthermore, we expect the Toys 'R' Us bankruptcy to continue to be a headwind for Spin Master as well as the global toy industry, which declined 2 per cent in 2018, the first year the industry posted a decline since 2009. Due to the overwhelming macro challenges and weaker-than-expected performance across the Hatchimals product line, we are compelled to move to the sidelines.”
“Assuming Hatchimals was 20 per cent of sales in 2017, as management indicated on its Q4/17 conference call, this implies net product sales of $310-million. Given the decline in sales witnessed in the Remote Control and Interactive Characters division from Q2/18-Q4/18, we estimate Hatchimals represented 15 per cent of net product sales or $250-million. Assuming Hatchimals continues to decline, which we believe will be the case, Spin Master will be forced to offset a material amount of lost Hatchimals sales during 2019. This could prove to be a challenging headwind over the course of the year.,” he said.
He downgraded Spin Master to “hold” from “buy” and cut his target price to $45 from $63. The median is $62.50.
TD Securities also cut its target price to $62 from $66.
In other analyst actions:
Air Canada : TD Securities raises target price to C$45 from C$44
* Bonterra Energy Corp : BMO cuts target price to C$6 from C$7
* Capstone Mining Corp : CIBC cuts price target to C$0.80 from C$0.95
* Cenovus Energy Inc : BMO raises target price to C$15 from C$13.50; Raymond James cuts price target to C$12 from C$13
* Chemtrade Logistics Income Fund : Raymond James cuts PT to C$12.5 from C$15.0 and cuts to market perform from outperform
* Computer Modelling Group Ltd : BMO cuts target price to C$9 from C$11
* Dream Industrial REIT : CIBC raises price target to C$11 from C$10.75; National Bank of Canada resumes coverage with C$11.25 TP and outperform rating
* First Capital Realty Inc : CIBC raises price target to C$22.50 from C$22; TD Securities raises target price to C$24 from C$23
* Goeasy Ltd : TD Securities raises target price to C$62 from C$59
* Killam Apartment REIT : CIBC raises price target to C$19 from C$18.50; Raymond James raises price target to C$19 from C$18; TD Securities raises target to C$19.5 from C$18.5
* Manulife Financial Corp : TD Securities cuts target price to C$29 from C$30
* Riocan REIT : Raymond James raises price target to C$27 from C$26; TD Securities raises target price to C$28 from C$27
* Sierra Wireless Inc : Macquaire cuts to underperform
* Smartcentres REIT : CIBC raises price target to C$36 from C$34
* Sun Life Financial Inc : TD Securities cuts target price to C$57 from C$60
* Teck Resources Ltd : BMO cuts target price to C$47 from C$48; Credit Suisse cuts price target to C$38 from C$44.85; JP Morgan cuts price target to C$47 from C$49.50; Raymond James cuts price target to C$43 from C$46; TD Securities cuts target price to C$39 from C$42
* Tmx Group Ltd : RBC raises price target to C$93 from C$89
* Uni-Select Inc : National Bank of Canada cuts price target to C$24 from C$25
* West Fraser Timber Co Ltd : TD Securities cuts target price to C$84 from C$86
* Western Forest Products Inc : TD Securities cuts target to C$2.25 from C$2.5
* Yellow Pages Ltd : RBC cuts price target to C$9 from C$10; TD Securities cuts target price to C$8 from C$9.5