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

Dollarama Inc. (DOL-T) ended its 2023 fiscal year with “very strong” fourth-quarter results and a largely in-line outlook for sustained growth over the next 12 months, according to National Bank Financial analyst Vishal Shreedhar.

Shares of the Montreal-based discount retailer rose 2.5 per cent following Wednesday’s premarket release, which included same-store sales growth of 15.9 per cent, exceeding the Street’s expectation of 9 per cent driven by strong demand and higher price points. Sales of $1.473-billion and earnings per share of 91 cents also topped the consensus forecasts ($1.4-billion and 85 cents).

For its 2024 fiscal year, Dollarama is expecting same-store sales to increase 5-6 per cent, versus 12 per cent in 2023. Mr. Shreedhar is projecting a 6.1-per-cent gain.

“DOL’s oftentimes conservative outlook suggests F2024 EPS of $3.00- $3.20; NBF is $3.15 (unchanged),” he said.

“F2024 outlook details are: (a) SSSG of 5.0-6.0 per cent (stronger in H1/F24; NBF at 6.1 per cent), (b) 60-70 store openings (NBF at 65), (c) Gross margin of 43.5-44.5 per cent (NBF at 44.1 per cent), (d) SG&A rate of 14.7-15.2 per cent (NBF at 14.7 per cent), (e) $190-$200-million capex (excludes an $87-million land acquisition; NBF at $287-million), (f) Net debt to EBITDA to remain below target of 2.75x-3.00 times (NBF at 2.54 times).

Mr. Shreedhar said he’s maintaining “a positive view” on Dollarama, citing “its strong cash flows, solid balance sheet and resilient sales performance.” However, he did warn of a difficult macroeconomic backdrop.

“DOL expects higher gross margin in F2024 (supply chain normalization, partly offset by higher expected consumables mix),” he said. “This will be offset by heightened SG&A growth (higher labour costs, partly offset by leverage/ efficiency).

“Dollarcity added 45 stores in Q4 and expects to add 60-70 stores in F2024 (added 90 in F2023). DC’s earnings contribution was impacted, in part, by an inventory rebuild, which has largely resolved.”

With minor adjustments to his forecast for the next two fiscal years, Mr. Shreedhar raised his target for Dollarama shares to $92 from $90, maintaining an “outperform” recommendation. The average target on the Street is $90.36, according to Refintiv data.

Others making changes include:

* CIBC’s Mark Petrie to $89 from $84 with a “neutral” rating.

“Dollarama reported strong Q4 results with excellent same-store sales (SSS) growth fuelled by both inflation and consumer trade down to discount goods. We expect both trends to continue for at least H1, and see SSS guidance as conservative. However, cost inflation remains challenging and will limit bottom-line leverage, even with GM% expansion. Clearly DOL is well positioned in this market, and remains a best-in-class company, but we see growth as appropriately valued,” said Mr. Petrie.


With a “sharp” drop in its outlook for 2023 placing its review of strategic options “in focus,” National Bank Financial analyst Rupert Merer downgraded Loop Energy Inc. (LPEN-T) to “sector perform” from “outperform” previously.

Shares of the Vancouver-based hydrogen fuel cell system manufacturer jumped 5.6 per cent on Wednesday with the announcement it has retained Credit Suisse as a financial adviser “to advise on strategic alternatives.”

That came after revenue for its fourth quarter came in at $0.7-million, below the $1.6-million estimate from Mr. Merer and the Street, as unit sales lagged (9 versus the analyst’s expectation of 24). An adjusted EBITDA loss of $9.1-million was better than he expected (a loss of $10.1-million) due to headcount and expense reductions.

“LPEN cites recent volatility in capital markets and inflationary pressures as the main drivers of its weaker results, which it expects to continue into 2023E, extending timelines for new and existing projects,” said Mr. Merer. “LPEN forecasts unit sales to be in line or slightly above this year’s 49 units, but well below our previous 350-unit estimate due to a delayed more than $12-million purchase commitment from Tevva Motors.

“With slower growth expectations, LPEN has engaged in headcount and opex reductions to ensure it can fund operations for the calendar year. However, with $24.5-million in cash, LPEN is in a difficult position and has hired a financial advisor to review strategic alternatives. We believe an equity raise would be challenging and a potential sale could be on the table, though the company could see a wide range of potential outcomes from the review.”

Mr. Merer thinks Loop could see benefits from the federal budget, pointing to a 30-per-cent tax credit for clean technology manufacturing and a 15-40-per-cent tax credit for clean hydrogen technologies. However, he expects a “limited” near-term impact.

Reducing his revenue forecast, he cut his target to $1.25 per share from $2.50. The average on the Street is $1.94.

“We have updated our model to account for LPEN’s guidance, which suggests that revenue should be flat to slightly up year-over-year in 2023,” said Mr. Merer. Previously, we were modelling revenues significantly higher under the assumption that LPEN’s customer, Tevva Motors, would anchor its sales with a purchase commitment of more than US$12-million through 2023E. At best, this commitment could be realized in future years. Our valuation was previously based on an EV/sales multiple 6.5 times EV/Sales on 2023E. However, with significant reduction in sales forecasted, we are reducing our target to $1.25/sh by rolling forward our multiple to 8 times EV/Sales on 2024E, in line with hydrogen peers. We are moving to Sector Perform. With lower sales (on negative gross margins) and a cut to operating costs, LPEN could see a smaller loss than we had previously forecasted.”

Elsewhere, Cormark Securities’ MacMurray Whale trimmed his target to $1.70 from $2.50 with a “market perform” rating.


Pivotree Inc. (PVT-X) has shown “strong momentum and execution on driving bookings and profitability in a tough macro,” according to Canaccord Genuity analyst Robert Young, who said his “positive view remains intact” after stronger-than-anticipated fourth-quarter results.

Accordingly, citing the return to positive EBITDA and improving visibility, he raised his rating for the Toronto-based IT service management company to “buy” from “speculative buy” previously.

On Wednesday before the bell, Pivotree reported revenue for the quarter of $26.2-million, up 18 per cent year-over-year and topping both Mr. Young’s $24.5-million estimate and the consensus forecast of $24.4-million. He attributed the beat to “momentum in Data Management and supply chain,” leading to a better-than-expected performance from both its Professional Services and Managed Services segments. Its EBITDA of $1.3-million also beat projections ($0.3-million and $0.1-million, respectively).

“Pivotree reported strong Q4 results with a beat on revenue and profitability metrics,” said Mr. Young. “Management notes the pipeline remains strong, up 46 per cent from Q4/21 levels, and it has high visibility to $80-million-plus of 2023 revenue. Gross margins are expected to continue expansion on an annual basis driven by improved utilization and mix of higher-margin contracts in the pipe and a steadily growing attach rate on higher-margin IP offerings. As well, management sees sustainable EBITDA and free cash flow growth going forward. While management highlighted the evolution of the business from omnichannel to a broader offering of omnichannel + supply chain + data management as a driver, the emergence of data management appears to be the MVP. Pivotree’s data business continued to showcase strength with new logos and expansion while Commerce was impacted by some elongated deals, although management noted new logo activity is picking up. ProServ bookings were especially strong in Q4, up 60 per cent year-over-year, and management noted that contract length and visibility was higher as customers signed up to more offerings and IP. We expect seasonality and unchanged Oracle ATG churn on legacy contracts to dampen revenue in Q1.”

Mr. Young expects EBITDA to remain positive moving forward, adding: “Management reiterated its expectations of sustainable positive EBITDA going forward and aim to double cash flow and new product investments in the next 24 months. Pivotree expects to achieve this by maintaining strong utilization rates that should see further improvement in H2, driven by improvements in the Commerce BU along with higher IP attach and disciplined spend on growing its higher-margin IP suite. In conjunction, management noted that it sees a clear path to 50-per-cent gross margins in the near term. We believe Pivotree can drive 4-5-per-cent EBITDA margin in 2023 and 7-9 per cent in 2024.”

Raising his 2023 EBITDA estimate, he increased his target for Pivotree shares to $5.50 from $5. The average is $7.44.

Elsewhere, Cormark Securities’ Jesse Pytlak lowered his target to $5.50 from $7, reaffirming a “buy” rating.


While the fourth-quarter results from Constellation Software Inc. (CSU-T) were “robust,” Raymond James analyst Steven Li said investors should be focused on the performance of recently acquired Altera Digital Health.

“While Altera is not considered a reportable operating segment of CSU, given it is CSU’s largest acquisition, we track it separately,” he said. “Altera’s organic revenue growth continues to drag down the group’s overall performance, coming in at down 13 per cent year-over-year at constant currency this quarter. This is a bit worse compared to Altera down 3 per cent year-over-year in F2021 when it was still part of Allscripts.

“Margins also sub-par. A-EBITDA contribution and A-EBITDA margin came in at $19-million and 9.6 per cent this quarter vs. 15.3 per cent in 4Q21.”

With its EBITDA beat ($496-million versus the consensus estimate of $472-million), Mr. Li raised his target for Toronto-based Constellation to $2,500 from $2,250, maintaining a “market perform” rating. The average is $2,665.47.

Others making changes include:

* RBC’s Paul Treiber to $3,000 from $2,600 with an “outperform” rating.

“Constellation reported solid Q4 results. Even excluding the upside from stronger hardware revenue, Q4 was still better than RBC/ consensus,” said Mr. Treiber. “Combined Q4 and Q1 capital deployed on acquisitions is 45 per cent above our expectations, further affirming that Constellation’s M&A model is scaling. With inflation as a tailwind to organic growth and strong M&A, we see Constellation’s growth accelerating in 2023.”

* BMO’s Thanos Moschopoulos to $2,800 from $2,650 with an “outperform” rating.

“We remain Outperform on CSU and have raised our target price to $2,800 following Q4/22 results that were ahead of consensus on both revenue and EBITDA, with healthy organic growth,” said Mr. Moschopoulos. “Importantly, the company continues to deliver strong year-over-year earnings growth (even stripping out the spinoffs), demonstrating that the law of large numbers has not set in. We have raised our FY2023/24 EBITDA estimates. CSU remains our top large-cap pick, given its defensive characteristics and our view that the stock’s valuation remains attractive relative to its growth profile.”

*CIBC’s Stephanie Price to $2,450 from $2,407.32 with an “outperformer” rating.

“Overall, we see Constellation as well positioned to execute on M&A in the current environment and see opportunities for further carve-outs (similar to Altera) and spin-outs (similar to the recently spun out Lumine Group),” she said.


Seeing its current risk-reward proposition as “compelling,” IA Capital Markets analyst Neehal Upadhyaya thinks Sabio Holding Inc. (SBIO-X) “represents an excellent opportunity for investors who want to invest in an AdTech story at a de-risked valuation level.”

Accordingly, he initiated coverage of the Toronto-based provider of connected TV (CTV) and over-the-top advertising platforms with a “buy” recommendation on Thursday.

“Due to its comprehensive AdTech solution suite, Sabio has been able to attract a strong group of blue-chip customers, enabling it to grow by 80 per cent over the past two years despite the continued softness in the macroeconomic environment,” said Mr. Upadhyaya. “By leveraging the insights provided by App Science, SBIO can solidify its positioning within the many demand-side platforms that are used by its customers. As Sabio continues to demonstrate its value proposition, the Company should be able to capture a larger portion of its customers’ sizeable marketing budgets from its competitors.”

The analyst called App Science, its “robust” data analytics platform, “a key differentiator for SBIO’s customers, enabling them to dynamically modify their ad campaigns and generate a campaign that is specifically suited to a certain demographic to achieve a more robust RoAS.”

“The Company uses data collected from 280-million-plus mobile devices, and 110 million CTV households that produce a detailed household graph consisting of 55 million validated U.S. households, representing a larger reach than CTV market leader Samsung (005930-K, Not Rated) (with 40 million),” he said.

Forecasting top-line growth of 29 per cent and 25 per cent year-over-year in 2023 and 2024, Mr. Upadhyaya set a target of $2.90 per share. The current average on the Street is $3.38.

“Despite a superior growth profile compared to its AdTech peers, achieving positive Adj. EBITDA, and supporting its growth strategy from FCF, the Company is trading at just 0.5 times our 2024 revenue estimate,” he said.

“We believe that most of the discount in the Company’s valuation reflects SBIO’s smaller market share in the CTV market along with greater liquidity risk, however, the Company is expected to generate vastly superior growth, especially on an organic basis. We believe the valuation gap should narrow as SBIO continues to execute on its growth strategy by adding new customers and increasing its Adj. EBITDA margin profile.”


In other analyst actions:

* TD’s Michael Van Aelst initiated coverage of Pet Valu Holdings Ltd. (PET-T) with a “buy” rating and $45 target, which is below the $46.43 average on the Street.

* CIBC’s Bryce Adams started Filo Mining Corp. (FIL-T) with an “outperformer” rating and $38 target, exceeding the $31.41 average.

“We regard Filo Mining (soon to be Filo Corp.) as one of the most exciting mineral exploration companies in the base metals space. In the last two years, and on the back of very strong drill results, the company’s share price has already appreciated from below $10 to current levels of approximately $21,” he said. “We continue to foresee upside in the stock.”

* Canaccord Genuity’s Matthew Lee trimmed his Chorus Aviation Inc. (CHR-T) target to $3.25 from $4 with a “hold” rating. The average is $4.50.

“Chorus hosted its first investor day [Wednesday], with key highlights including additional color around the asset-light leasing model and updates on the Fund 3 raise,” said Mr. Lee. “Management provided an in-depth case study on fund-based leasing, which included a view on how Falko’s funds deliver solid returns to both the firm and its limited partners. Chorus also offered insights into its aircraft sale opportunities, noting that it could dispose of up to US$700-million of aircraft over the next 3-5 years, substantially accelerating the firm’s de-leveraging efforts. The company reiterated its earlier guidance and expects to wind down Fund 1 by the end of F25. In our view, CHR will continue to be an execution story as it shifts its revenue mix over the next several years. In the nearer term, we have reduced our F24 and F25 estimates to reflect a more rapid reduction in leasing revenue associated with aircraft sales, together with slightly higher interest and depreciation.”

* Echelon Partners’ Andrew Semple reduced his Columbia Care Inc. (CCHW-CN) target to $1.65 from $3, keeping a “tender” recommendation, Other changes include: Roth’s Scott Fortune to $1 from $2 with a “buy” rating and Canaccord Genuity’s Matt Bottomley to $1.50 from $2.10 also with a “buy” rating. The average is $4.25.

“In addition to macro-level industry headwinds, during Q4/22 (and into Q1/23), CCHW began implementing various operational/financial initiatives in advance of closing its deal with Cresco (including corporate restructuring, non-core asset divestitures, and other cost-savings endeavors), which resulted in near-term inefficiencies that CCHW believes will better position itself for free cash flow generation in the periods ahead,” said Mr. Bottomley.

* CIBC’s Anita Soni bumped her Equinox Gold Corp. (EQX-T) target to $5.40 from $4.70, keeping an “underperformer” rating, while National Bank’s Mike Parkin increased his target to $7.25 from $6 with a “sector perform” rating. The average is $6.48.

“Equinox has recently announced a series de-risking initiatives, which, in our view, has closed the funding gap on the large Greenstone JV build, assuming the project remains on budget and gold prices remain around current levels,” said Mr. Parkin. “We would also note that Equinox still holds a number of equity positions that could be divested to raise additional funds in the future if needed.”

* Following the release of a new mineral resource and production plan for its Xavantina gold operation in Brazil, Raymond James’ Farooq Hamed raised his Ero Copper Corp. (ERO-T) target by $1 to $25, keeping an “outperform” rating. The average is $25.11.

* Morgan Stanley’s Ioannis Masvoulas cut his targets for First Quantum Minerals Ltd. (FM-T) to $22 from $25 with an “underweight” rating and Lundin Mining Corp. (LUN-T) to $9.50 from $12.80 with an “overweight” rating. The averages are $30.97 and $9.56, respectively.

* Berenberg’s Charlie Rothbarth reduced his targets for Galiano Gold Inc. (GAU-T, “buy”) to 90 cents from $1.10 and Yamana Gold Inc. (AUY-N/YRI-T, “hold”) to US$5.90 from US$6.10. The averages are $1.05 and US6.26, respectively.

* CIBC’s Nik Priebe dropped his Goeasy Ltd. (GSY-T) target to $130 from $180, maintaining an “outperformer” recommendation. The average is $173.33.

* JP Morgan’s Matthew Boss added Lululemon Athletica Inc. (LULU-Q) to the firm’s “U.S. Analyst Focus List” and kept an “overweight” recommendation. Others making target changes include: Barclays’ Adrienne Yih to US$413 from US$368 with an “overweight” rating and Baird’s David Manthey to US$425 from US$410 with an “outperform” rating. The average is US$394.35.

* Canaccord Genuity’s Yuri Lynk lowered his Neo Performance Materials Inc. (NEO-T) target to $13 from $15, below the $17.40 average, with a “buy” rating.

“While Neo’s near-term outlook has deteriorated on macroeconomic uncertainty, the semiconductor chip shortage, and declining rare earth prices, we believe most of this looks priced into the stock,” said Mr. Lynk. “We continue to view the company as well positioned to benefit from several secular demand drivers for rare-earth based magnets, including the increasing adoption of electric vehicles (EVs). Additionally, we see compelling strategic value in the company’s asset base, including the western world’s only commercial rare earth separation facility, as well as in management’s ‘magnets-to-mine’ strategy.”

* CIBC’s Christopher Thompson cut his Spartan Delta Corp. (SDE-T) target to $18 from $20 with an “outperformer” rating. The average is $19.94.

* Berenberg’s Richard Hatch trimmed his target for Wheaton Precious Metals Corp. (WPM-N, WPM-T) to US$48 from US$49 with a “buy” rating. The average is $52.50.

Follow David Leeder on Twitter: @daveleederOpens in a new window

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