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

Citi analyst Tyler Radke isslightly more optimistic” about Shopify Inc. (SHOP-N, SHOP-T) entering 2023, seeing e-commerce demand in the fourth quarter of last year appearing “better-than-feared against low expectations.”

“Shopify’s 4Q22 print could be better-than-expected on resilient GMV [gross merchandise volume] growth (we model 10.5 per cent vs. 9-per-cent street), buoyed by strong holiday sales by Shopify merchants, while channel inputs point to strength upmarket with higher Shopify Plus subscriptions,” he said. “We see possibility around disclosure changes, specifically lack of annual merchant count figure, with the new CFO/management team, which could add increased uncertainty.”

“Our channel checks also highlighted more migrations to Shopify Plus, including those from CRM/ADBE, with upmarket product momentum with Commerce Components. Finally, pricing changes to low- to mid-tier subscriptions announced on Jan. 25 could contribute a 5 per cent lift to 2023 subscription revenue, or 1-per-cent lift to total revenue.”

While he thinks stronger-than-anticipated results could lead to further share price appreciation for the Ottawa-based company, Mr. Radke warned he’s “more cautious” on Shopify’s outlook moving forward “despite positive price increases.”

“Increasing job cuts, declining savings, and broader macro pressure could result in further GMV deceleration in 2023,” he said. “As a result, we are slightly below street for Q1 and 2023, though our total revenue is higher, given our view of stronger Shopify Plus conversions, price increase tailwinds, and stronger take rate assumptions with growing international presence, Deliverr contributions, and continued adoption of Shopify Payments and other MS products (Shopify Capital, Shopify Markets, and POS hardware). We are below the street for Q1 and FY23 on operating and gross margins, as we expect higher costs than consensus is modeling, given ongoing investments.”

He raised his earnings per share expectation for the fourth quarter by a penny to a loss of 2 US cents “to reflect an increase in Shopify Plus subscriptions, price increase tailwinds, and a modest expansion in Merchant Solutions take rate.” His full-year 2023 and 2024 estimates rose to a loss of 3 US cents and a profit of 7 US cents, respectively from a loss of 9 US cents and 0 US cents.

Maintaining a “neutral” recommendation for Shopify shares, Mr. Radke raised his target to US$54 from US$35. The average target on the Street is US$43.06.

“We rate Shopify shares as Neutral/High Risk because while we appreciate the magnitude of the TAM, an acceleration of secular tailwinds coming into focus, a strong management team, and record of execution, we believe much of this is priced in at the current multiple—which earns a significant premium to the implied multiple of its growth/margin framework and implies a 10-year revenue CAGR [compound annual growth rate] that appears potentially too high,” he concluded.


Pointing to “the inflationary pressures facing multiple Western Canadian pipeline projects that are currently under construction,” RBC Dominion Securities analyst Robert Kwan thinks the market’s concerns about further costs increases to the Coastal GasLink pipeline project is likely to be “an overhang” for TC Energy Corp. (TRP-T) through 2023 and into next year.

Shares of the Calgary-based company dropped 5.6 per cent after it announced that it has increased the expected cost of the project in northern British Columbia to $14.5-billion. That’s up nearly 30 per cent from the previous estimate last year of $11.2-billion and up 134 per cent from the original price in 2018 of $6.2-billion.

“While the company attempted to convey to the market that costs would not significantly increase in the event of a construction delay to 2024 (i.e., up to a further $1.2-billion increase), we believe that some investors have gravitated to an in-service date in 2024 and a $15.7-billion cost estimate as being the ‘base’ case,” said Mr. Kwan.

The company reaffirmed its commitment to end its dividend reinvestment plan following the June 2023 dividend payment and plans to address its funding gap with asset monetizations, rather than equity issuance. Mr. Kwan sees potential asset sale announcements representing “visible positive catalysts” and noted the market still prefers a ‘go big and leave no doubt’ approach.

“We expect the company to scale up its $5+ billion asset monetization program to meet the incremental funding needs, while also addressing its plan to accelerate deleveraging, which leads us to believe the asset monetization target may be in the $7–8 billion range,” he said. “Based on our discussions with management, we expect the company to pursue numerous smaller transactions versus a single large transaction. Further, the company expressed to us that it is committed to executing its asset monetization program in 2023 (i.e., that it is not being spread out into 2024). As such, to close transactions by the end of 2023, we expect asset monetization announcements by mid-2023. Based on our discussions with private capital providers as well as recent pipeline transactions, we believe the current environment is supportive of TC Energy’s asset monetization plans.”

“To the extent that the company receives attractive offers for its assets, TC Energy expressed a willingness to scale up its asset monetization program beyond its incremental funding needs, which would also help address its plan to accelerate deleveraging. If the company decides to upsize its asset monetization program to further accelerate deleveraging, we think investors would positively view a much higher asset monetization program in the $10–15 billion range as outlined in our prior reports Specifically, we believe that the size of a program should remove funding and leverage as a key concerns for investors.”

In response to the impact of the CGL cost overrun, Mr. Kwan cut his 2023 and 2024 earnings per share projections to $4.28 and $4.21, respectively, from $4.35 and $4.51. That led him to lower his target for TC Energy shares to $65 from $73, keeping an “outperform” recommendation. The average target is $62.24.

“While we prefer cleaner midstream stories, we think patient, long-term focused investors will eventually be rewarded given the current valuation and likely catalysts in the form of asset sale announcements,” he said.

Elsewhere, CIBC World Markets’ Robert Catellier upgraded TC Energy to “outperformer” from “neutral,” believing “shares have priced in enough negativity.”

“We think a lot of negativity has been priced into the shares, and we are more inclined to own it,” he said. “There is still a potential change of cost overruns ($1.2-billion if the project extends into 2024, for example), but there is also a possibility of stronger demand and valuations in the asset sales process, not to mention potential recoveries down the road. We recognize the stock may churn as it goes through a period of adjustment as the market digests the news of the additional CGL costs; however, we expect an eventual recovery that makes it a worthwhile – albeit not risk-free – proposition. We believe the stock has a decent earnings outlook for 2023 and is trading at 12.6 times 2023 consensus earnings estimates, so the valuation could act as a measure of support as well.”

Mr. Catellier trimmed his target by $1 to $62..

Others making changes include:

* National Bank’s Patrick Kenny to $53 from $56 with a “sector perform” rating.

“Overall, we maintain our SP rating while our recommended entry point of sub-$50 implies a relatively conservative valuation of less than 11 times 2024 estimated AFFO [adjusted funds from operations] per share pending successful execution of asset sales and CGL completion,” said Mr. Kenny.

* Scotia’s Robert Hope to $66 from $67 with a “sector outperform” rating.

“Based on our conversations, the market remains concerned regarding additional cost overruns on the project, especially given there could be an additional $1.2-billion of cost if the project slips into 2024,” said Mr. Hope. “The market appears to be more than fully discounting this scenario with the nearly 6-per-cent decline in the share price moving down the company’s equity value by $3.6-billion. Our EPS estimates for 2024 and beyond decrease 2 per cent to reflect the higher capital cost which we expect will be funded through additional asset sales ($8-billion). Our target price moves down $1 per share to $66, commensurate with our lower estimates. We believe sentiment on the name could improve as asset sales are announced and there is further clarity on CGL’s timing and cost, which we expect towards the tail end of Q2/23.”

* Credit Suisse’s Andrew Kuske to $60.50 from $63 with a “neutral” rating.

* BMO’s Ben Pham to $64 from $66 with an “outperform” rating.

“We are now taking a much more conservative approach on CGL and assume timing delay, the extra up to $1.2-billion capex, and no recoveries,” said Mr. Pham. “There are still ample asset sale candidates to absorb and yield/valuation is attractive. Despite frustration but also remaining patient, we are maintaining our Outperform rating with a 25-per-cent potential total return to our new $64 target.”


National Bank Financial analyst Richard Tse continues to see CGI Inc. (GIB.A-T) as a “core tech holding” after its first-quarter 2023 financial results exceeded expectations on the Street.

“CGI reported strong FQ1 (CQ4) results with constant currency revenue growth of 12.3 per cent, continuing the momentum from the previous three quarters (13.9 per cent in FQ4′22; 11.5 per cent in FQ3′22; and 10.0 per cent in FQ2′22),” he said.” And while acquisitions continue to be a contributor to that growth – organic growth has been even more impressive – in the quarter, we estimate organic growth was 7.4 per cent year-over-year with underlying profitability support - ROIC [return on invested capital] increasing 20 basis points year-over-year to 15.5 per cent.”

Shares of the Montreal-based IT and business consulting services company jumped 4.1 per cent on Wednesday following the premarket earnings release, which saw revenue of $3.45-billion and adjusted earnings per share of $1.66 both top the consensus expectations of $3.33-billion and $1.60.

CGI helps companies contain costs without cutting staff

“On the acquisition side, while CGI did not close any acquisitions this quarter, a robust pipeline still has Management targeting $1-billion in capital deployment in F23,” said Mr. Tse. “Finally with respect to the outlook, with headcount increases being a leading indicator of growth, CGI ended the quarter with an employee base of 90,250 (up 7,250 employees year-over-year; up 250 quarter-over-quarter).”

Raising his sales and earnings projections through fiscal 2024, Mr. Tse increased his target for CGI shares to $140 from $135, maintaining an “outperform” recommendation. The average target on the Street is $133.77.

“Bottom line, while macro headwinds continue to have the potential to moderate investment, we believe CGI’s market position and cost savings / efficiency service offerings combined with its operating prowess offers resilience with growth and less (relative) volatility,” he said.

Other analysts making changes include:

* Desjardins Securities’ Jerome Dubreuil to $140 from $136 with a “buy” rating.

“Management notes that some of its clients are being more cautious in view of the uncertain macro environment,” he said. “However, this was not apparent in the company’s results nor in its bookings, which we believe demonstrates that most companies see digitization as key to improving operations. Additionally, management does not appear overly concerned by the current macro context as it looks ready to accelerate its M&A strategy.”

“.A strong reputation, end-to-end capabilities and a growing portfolio of IP make CGI a partner of choice for many clients embarking on new digitization journeys—we believe this gives CGI pricing power, which was apparent in the quarter. Moreover, we highlight that the vast majority of CGI’s contracts have embedded CPI-related price escalators, which derisks operations in the current context.”

* RBC’s Paul Treiber to $145 from $130 with an “outperform” rating.

“Q1 was well above RBC/consensus on better than expected organic growth. Even though the quarter was solid, we believe that growth is still likely to slow in coming quarters, given tougher comps, SI&C deceleration, macro, and the time to ramp managed services. Maintain Outperform, as CGI is a defensive stock with strong execution, resilient cashflows and a counter-cyclical M&A model,” said Mr. Treiber.

* Scotia Capital’s Divya Goyal to $140 from $135 with a “sector outperform” rating.

“Overall, we believe CGI’s strategic investments are starting to come through, as evident in company’s robust organic growth alongside its acquired revenues over the past few quarters,” she said. “The company’s well-established business model, deep-rooted client relationships and tightly managed client-based proximity model is truly a differentiator for CGI, making it a reliable investment esp. under uncertain macroeconomic conditions.”

* Canaccord’s Robert Young to $135 from $125 with a “buy” rating.

“We continue to view CGI shares as a safe harbor in recession given strong execution, long-duration contracts, a diverse large enterprise/government customer base and ability to offset organic growth headwind with M&A,” he said.

* Stifel’s Suthan Sukumar to $140 from $125 with a “buy” rating.

“We reiterate our BUY recommendation on CGI following strong FQ1 results that highlighted better-than-expected revenues, earnings, and bookings,” said Mr. Sukumar. “CGI appears to be well-positioned and benefiting early from the shift in IT spend priorities to cost-cutting given their end-to-end capabilities with managed services and IP, which ultimately serve as a key lever for improved operating leverage and margin expansion ahead given the higher-margin nature of these offerings. We are raising our target ... as we roll our valuation to C24 and on the back of higher forecasts that reflect stronger top-line growth coupled with more conservative margin assumptions. We continue to see an attractive risk-reward on shares given the valuation gap relative to global IT peers and CGI’s profile of defensive growth with margin expansion. M&A remains a key near-term catalyst, with growing potential for a larger than expected transaction given the current pipeline.”

* CIBC’s Stephanie Price to $146 from $140 with an “outperformer” rating.

“CGI’s solid FQ1 results illustrate the company’s resiliency in an uncertain market, with client demand accelerating for its cost-savings and digitization initiatives. CGI continues to post organic growth well above historical rates as it benefits from investments in IP and managed services capacity. While margins were down 80 basis points year-over-year, we expect margin improvement through F2023 as recent bookings flow through to revenue, global delivery centres drive cost savings, and the company benefits from merger synergies from the $600-million in M&A completed last year. We regard CGI as well positioned to continue to execute on M&A, with management planning to allocate $1-billion in capital to M&A in F2023 and noting a pipeline that includes larger deals,” said Ms. Price.

* BMO’s Thanos Moschopoulos to $133 from $125 with an “outperform” rating.

* Raymond James’ Steven Li to $138 from $134 with an “outperform” rating.


IA Capital Markets analyst Sehaj Anand thinks Osisko Gold Royalties Ltd. (OR-T) possesses “all the attributes of a successful royalty and streaming company, including a portfolio of high-quality assets with low geopolitical risk, limited concentration risk, and peer-leading growth profile.”

In a research note released Thursday, Mr. Anand resumed the firm’s coverage of the Montreal-based company with a “strong buy” recommendation, expecting its current trading discount to larger royalty peers to narrow as production intensifies moving forward.

“Osisko has a high-quality portfolio of more than 175 royalties and streams, including 20 currently producing assets,” said Mr. Anand. “Approximately 79 per cent of the Company’s NAV [net asset value] is derived from North American assets. Over 80 per cent of Osisko’s revenue in 2021 and year-to-date 2022 was generated from the U.S. and Canada compared to its peers ranging from 10 per cent to 40 per cent. This makes Osisko’s asset portfolio the safest among its peers from a geopolitical risk standpoint, which in our view deserves a premium given the current turbulent geopolitical environment around the world.”

“From 2023 onwards, the Company will begin receiving Gold Eq Ounces (GEOs) from the newly acquired CSA Mine and Tintic. Near-term growth is expected to be sourced from the Mantos Blancos and Eagle expansion, as well as production ramp-up at Tocantinzinho, Akasaba West, and Windfall, among others. Some key projects that will fuel Osisko’s longer-term growth include Back Forty and Hermosa, among others. Osisko is expected to generate a 7-per-cent five-year (2023 to 2027) GEO production CAGR just from the current asset portfolio ... The Company is leading GEO production growth within the intermediate and senior royalty space.”

Mr. Anand called Osisko’s balance sheet “strong” and providing “sufficient firepower” to explore significant future acquisitions. He estimates it entered 2023 with a cash balance of $90.5-million and $400-million undrawn from its revolving credit facility.

“The Company has US$75-million in funding commitments for 2023, which is expected to be paid in Q1/23 once the CSA transaction is closed,” he said. “We foresee no near-term financial concerns and expect Osisko will generate consistent free cash flow growth that coincides with its near-term GEO production growth, and, at spot prices, we forecast a free cash flow yield of 3.0 per cent in 2023.”

The analyst set a price target of $25 per share. The current average on the Street is $22.67.

“Osisko trades at 1.0 times NAV [net asset value] and 18.4 times 2023 CFPS [cash flow per share], a discount relative to its peer average of 1.7 times and 20.0 times, respectively,” he said. “OR’s shares have traded at a discount to peers ever since the Cariboo mine acquisition in 2019. Subsequently, Cariboo was spun out (lowering risk) into Osisko Development (ODV-X, Not Rated) in 2020 while keeping 75-per-cent ownership interest in the vehicle. The Company has since reduced its ownership in ODV to 44 per cent and recently deconsolidated ODV from its financial statements. We believe that with ODV’s de-consolidation Osisko relays a clear message of continued focus on its royalty and streaming model and a re-rate is warranted as the Company delivers on its peer-leading GEO growth going forward.”


“Positive” markets since the end of the third quarter support higher valuations for Canadian asset managers as earnings season begins, according to Canaccord Genuity analyst Scott Chan.

“For Q4/22, our Cdn. asset manager (avg.) coverage universe had a total return of 6.0 per cent (IGM best at 11.4 per cent) performing in line with the TSX Composite,” he said. “In 2022, our Group (avg.) returned negative 31 per cent, significantly underperforming the TSX. Last year, IGM stock held up best (down 12.1 per cent) but compared unfavorably to the TSX at a decline of 5.8 per cent. Last year, CIX and ONEX shares significantly underperformed returning negative 46 per cent and negative 34 per cent, respectively.

“For Q4/22, we raised our forecasts mainly to reflect positive equity markets supporting higher assets/NAV (relative to our prior mark).”

In a note released Thursday, Mr. Chan increased his target prices by an average of 5 per cent, noting equity market returns have been solid this far in 2023 for the majority of North American asset managers.

His changes were:

* CI Financial Corp. (CIX-T, “buy”) to $23 from $22. The average on the Street is $19.19.

“For 2022, we forecast CIX adj. EPS of $3.13 (up 0.6 per cent year-over-year) with annual earnings growth that would rank top amongst NA Asset manager peers,” he said. “That said, CIX’s 2022 share performance of negative 46 per cent was at the bottom of NA peers we track , which was entirely driven by multiple compression. At the start of 2022, CIX stock traded at P/E (fwd.) of 7.5 times compared to P/E (fwd.) of 4.0 times at the end of 2022.”

* IGM Financial Inc. (IGM-T, “buy”) to $43 from $40. Average: $43.50.

“We believe the following Q4 themes are the most relevant heading into the quarter: (1) RRSP season outlook relating to net flows by segment (particularly Investors Group and Mackenzie) amidst higher equity markets near term (Q4: IGM announced more than $0.4-billion of total net outflows vs. more than $1.3-billion in net sales for Q4/21); (2) traction toward management’s full year 2022 expense guidance of no more than 3 per cent (expect 2023E cost guidance to be unveiled with Q4 results); (3) early traction on new Primerica opportunity from recently disclosed multi-year product and services distribution agreement; (4) current marks on strategic investments particularly relating to Wealthsimple and ChinaAMC; and (5) M&A pipeline with interest toward adding scale in Canadian wealth management (i.e. HNW / UHNW) and asset management (i.e. expand product offering). Last quarter, management mentioned M&A opportunities remained thin due to near-term market volatility,” he said.

* Onex Corp. (ONEX-T, “buy”) to $100 from $96. Average: $90.80.

“Our higher NAV (US$) estimate primarily reflects: (1) higher revisions on private company marks from positive Q4 equity markets (i.e. S&P 500 up 7.6 per cent in Q4); (2) solid Q4 performance within Onex’s public companies (e.g. PWSC up 38 per cent, CLS up 34 per cent); (3) larger marks at Onex Credit partners (i.e. mainly from equity tranche investments in CLOs with the Credit Suisse Leverage Loan Index up 2.3 per cent in Q4/22); and (4) slightly higher unrealized carried interest,” he said. “We note the following private equity potential headwinds: (1) sharply higher interest rates can impact private equity marks, and a higher cost of debt could impact operating margins; (2) volatile markets could impact / delay fundraising activities (e.g. firm targets raising $3-billion in fee-generating AUM in 2022, which is below their target rate with the shortfall mainly related to timing and management expectation of making up a good portion of it in 2023) and monetization efforts (e.g. IPO markets soft, sponsor-to-sponsor exits slowed); and (3) lower private / public company returns could impact Fund returns and ability to earn carried interest. Based on our Q4/22 estimated NAV forecast, we estimate Onex shares now trade at a 44.4-per-cent discount (trough levels) vs. a 9.6-per-cent historical discount over the past five years.”


Ahead of quarterly earnings season for Canadian insurance companies, BMO Nesbitt Burns analyst Tom MacKinnon sees “little likelihood of significant beats/raises.”

“In uncertain markets, catalysts continue to be earnings beat/raise-related,” he said in a note released Thursday. “Outside of FFH/TSU, we don’t see this with P&C insurers, given inflationary pressures on personal auto claims costs. For the Canadian lifecos, we see little likelihood of this as well, given the significant time lag before the benefit of rising interest rates impacts earnings (even longer under IFRS17), and the fact that 2023 estimates are under IFRS17 (for which we won’t get results until Q1/23 — and they will take several months to comprehend). While lifeco group is still inexpensive, at 9.3 times NTM [next 12 months], versus 10.0 times average since 2008, it’s rebounded off the bottom (helped by rising rates, and the continued out-performance of ‘value”) and is up 20 per cent over the past four months, outperforming Canadian banks (up 9 per cent) and S&P/TSX (up 13 per cent), reducing its NTM P/E discount to the banks from 17 per cent to 7 per cent, in line with 5-per-cent historical average.”

Mr. MacKinnon made these target adjustments:

  • Great-West Lifeco Inc. (GWO-T, “market perform”) to $37 from $32. Average: $34.90.
  • IA Financial Corp. Inc. (IAG-T, “outperform”) to $94 from $84. Average: $89.83.
  • Manulife Financial Corp. (MFC-T, “market perform”) to $29 from $27. Average: $27.33.
  • Sun Life Financial Inc. (SLF-T, “outperform”) to $76 from $72. Average: $70.86.

“What we’re watching for the lifecos. Generally company-specific,” he said. “For MFC it’s Asia sales (continued weakness, but improvement q/q) and new business gains in Asia (expected to rebound over recent lows). For SLF, it’s the outlook for U.S. employee benefits business, especially given DentaQuest acquisition, Asia sales (which continue to rebound) and MFS margins as markets rebound. For IAG, it’s sales momentum, which continues, and a continuation of more normalized/net neutral policyholder experience versus an outsized Q1/22. For GWO it’s Empower, which has been weaker than expected on both revenue and opex, as well as outlook for U.K./Europe operations given economic uncertainties.”

Elsewhere, Credit Suisse’s Joo Ho Kim raised his targets for Great-West Lifeco Inc. (GWO-T) to $36 from $33 and Manulife Financial Corp. (MFC-T) to $27 from $25 with “neutral” recommendations for both.

“The Canadian lifeco shares finished last year on a strong footing, outperforming its large cap bank peers by 360 basis points,” he said. “The discussions we had with investors since the publication of our initiation report in January suggest the focus continues to remain on ‘risk management’ for the sector, which is unsurprising given the impact the market declines created for what was ultimately a challenging year for the lifecos on a fundamental basis. Despite this challenge, we continue to believe in the earnings resiliency for the group (even post IFRS-17), with the companies remaining well positioned from a capital perspective, to benefit from higher rates, and to deliver solid growth over the medium-term.”


In other analyst actions:

* CIBC’s Dean Wilkinson cut his Allied Properties REIT (AP.UN-T) target to $35, below the $35.85 average, from $36 with an “outperformer” rating, while Desjardins Securities’ Lorne Kalmar trimmed his target to $34.75 from $35 with a “buy” rating.

“AP’s 4Q performance reinforces our view that the portfolio should continue to weather the storm relatively well,” said Mr. Kalmar. “While details were scant, we revised our estimates to reflect the UDC [urban-data-centre] portfolio disposition in mid-2023. We lowered our target modestly ... reflecting a slight decline in our NAV estimate (151 Front cap rate +10bps). We maintain that at its current valuation, AP’s unit price remains excessively discounted.”

* BMO’s Peter Sklar cut his Exco Technologies Ltd. (XTC-T) target by $1 to $8 with a “market perform” rating. The average is $10.13.

“Exco reported a slight FQ1/23 adjusted EPS miss of $0.12 vs. BMO/Mean $0.13/$0.16. The Casting and Extrusion (C&E) segment grew 50.2 per cent while margins remain depressed due to inflationary pressures and startup costs. Management believes that the demand is strong with the large mold group Backlog/Sales ratio at all-time high in January 2023. We remain on the sideline and are waiting for operations to improve in the C&E segment,” said Mr. Sklar.

* Credit Suisse’s Fahad Tariq increased his targets for Hudbay Minerals Inc. (HBM-T) to $9 from $8.50 with an “outperform” rating and Lundin Mining Corp. (LUN-T) to $10.25 from $8.25 with a “neutral” rating. The averages are $9.51 and $9.13, respectively.

“Copper prices have rallied to start the year due to a number of factors, including a broad commodities rally on a weaker U.S dollar, potential Chinese demand rebound, and supply issues in South America. At the time of this writing, spot copper is a healthy $4.25 per pound. “Looking back at Q4-22, copper averaged $3.64/lb, 3.4 per cent higher quarter-over-quarter ($3.52/lb) so we expect higher copper revenues sequentially and potential positive provisional pricing adjustments. ... We expect copper prices to remain subdued in 2023 due to lower demand (despite China reopening), but remain constructive 2025+.”

* BMO’s Randy Ollenberger hiked his target for MEG Energy Corp. (MEG-T) to $25 from $21, keeping an “outperform” rating. The average is $24.

“BMO Capital Markets hosted MEG Energy’s CEO Derek Evans and CFO Ryan Kubik for a ‘desk update.’ Key areas of discussion included the company’s asset base, shareholder returns, debt reduction, and heavy oil markets. We believe that MEG offers investors significant leverage to improving heavy oil prices as well as a potential equity re-rating as the company reduces its financial leverage and expands its share buyback program,” he said.

* Following its fourth-quarter preannouncement after the bell on Wednesday, Raymond James’ Steven Li cut his VerticalScope Holdings Inc. (FORA-T) target to $10.50 from $16 with an “outperform” rating, whiole Canaccord Genuity’s Aravinda Galappatthige lowered his target to $10 from $11 with a “buy” rating. The average on the Street is $13.64.

“We continue to value the stock on 8 times EV/EBITDA which we believe is quite conservative considering that our valuation is based on a depressed 2023,” said Mr. Galappatthige. “With that said, we believe that the steep downswing in revenue and earnings expectations over the past 6 months could cause investors to take a cautious stance on valuations in the near term.

“We nevertheless maintain our view that VerticalScope carries significant upside potential over the medium to longer term due to its niche properties and attractive business model. We note that even our new estimates, the stock trades at a compelling 10-per-cent FCF yield (CG definition of FCF) with no significant balance sheet challenges. With the aforesaid reductions to headcount, we also believe that the company can maintain a mid-30s margin profile. We thus maintain our BUY rating on the stock.”

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