Inside the Market’s roundup of some of today’s key analyst actions
Following weaker-than-anticipated first-quarter financial results, National Bank Financial analyst Adam Shine downgraded Transcontinental Inc. (TCL.A-T) to “sector perform” from “outperform” previously, pointing to “macro pressures that exacerbated secular declines.”
“While FX is offering top-line support, margins are tracking lighter than expected especially for Printing where TCL was previously able to use efficiencies to better mitigate revenue pressure,” he said. “Although the elevated flyer volume decline looks cyclical and Packaging destocking will dissipate, we adjusted our forecast more conservatively.”
Shares of the Montreal-based packaging, commercial printing and specialty media company dropped over 8 per cent on Wednesday after it reported revenue of $707-million, up 2.4 per cent year-over-year but below both Mr. Shine’s $724.8-million and the consensus expectation on the Street of $714.6-million. Adjusted EBITDA was down 5.5 per cent to $84.1-million, missing estimates ($98.5-million and $97.4-million, respectively), while adjusted earnings per share of 24 cents fell 16 cents below the projections of both.
“TCL noted on its Q1 call that the 3-per-cent decline in Packaging volume was relatively evenly split between LATAM and the beverage business where destocking occurred,” said Mr. Shine. “Beverage has since seen some inflow of orders and management remains cautiously optimistic that volume can return. LATAM will continue to be impacted by the conflict in Ukraine, but elevated raw material costs are increasingly being worked through to help ease some related margin pressure. It was said that all Packaging units improved margins year-over-year except for LATAM. As for Printing, it’s still difficult to say when a material improvement in flyer volume will materialize, but the new Metroland mandate will be additive in the newspaper segment and ISM should benefit from a significant customer that deferred a planned refresh program with TCL that will still be happening this year to help volumes over coming quarters. Management noted that cost cutting efforts across Packaging and Printing should result in annualized savings of $15-million with likely more efficiencies being pursued to better right-size expenses amid evolving secular challengers that have been exacerbated by current economic conditions.”
After reducing his revenue and earnings forecast for both fiscal 2023 and 2024, Mr. Shine cut his target for Transcontinental shares to $16 from $19. The average is $19.33.
Elsewhere, others making target changes include:
* RBC’s Drew McReynolds to $19 from $23, keeping an “outperform” rating.
“While we expect choppy Printing performance to weigh on the stock in the near-term, we believe Q1/23 results are likely to be the trough quarter for operating performance this cycle reflecting strengthening revenue momentum within Packaging and the flow-through of cost savings within Printing,” he said.
* BMO’s Stephen MacLeod to $17 from $20 with a “market perform” rating.
“Adj. EBITDA growth in Packaging (below forecast) and Media & Other (above forecast) was more than offset by a decline in Printing (below forecast). 2023 outlook unchanged in Packaging (organic volume and EBITDA growth) but moderated in Printing (expected volume declines to lead to year-over-year declines in revenue and adj. EBITDA). We see opportunity for a valuation re-rating over time, but Transcontinental’s tilt towards growth would need to be accompanied by sustained ROIC improvement,” said Mr. MacLeod.
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Desjardins Securities analyst Benoit Poirier says he’s “very pleased” with the fourth-quarter financial results from Stella-Jones Inc. (SJ-T), believing its “outlook for 2023 is bright thanks to the continued demand for utility poles and strength of the U.S. dollar.
“We forecast 2023 organic growth of 19.9 per cent for utility poles, 2.3 per cent for railway ties and down 16.5 per cent for residential lumber,” he said. “Additionally, we forecast an adjusted EBITDA margin of 15.1 per cent following management’s positive comments on pricing.”
Shares of the Montreal-based wood products producer jumped 4.3 per cent on Wednesday following its premarket earnings release, , which included EBITDA of $87-million, exceeding both Mr. Poirier’s $84-million forecast and the Street’s estimate of $78-million.
Mr. Poirier said he expects “impressive” organic growth from Stella-Jones’ utility poles segment to continue to accelerate in 2023 with management projecting a 20-per-cent increase “as tailwinds” persist.”
“SJ expects organic growth for 2023 to be in line with the 21 per cent achieved in 2022 (excluding any impact from M&A), substantially above strategic plan target of high single digits and our previous estimate of 7 per cent,” he said. “Management’s tone is cautious for the longer term and it stated that more colour will be provided at the upcoming investor day — a bullish sign, in our view (SJ will likely increase its targets). SJ’s utility customers continue to invest and seek long-term partnerships and are looking to tie up SJ so they can secure supply and realize their projects.
“SJ management [is] optimistic it can reach 15-per-cent EBITDA margin in 2023. SJ’s contractual sales agreement structure allows it to pass on pricing while insulating the business from rising costs. We see this as a positive read-through for 2023 as management reiterated its confidence in reaching the 15-per-cent level and believes there is no reason it cannot achieve this target.”
Believing “significant M&A could take a back seat in the short term given the attractive pipeline of organic growth opportunities,” Mr. Poirier hiked his target for the company’s shares to $71 from $63 with a “buy” rating. The average is $59.29.
“SJ’s healthy balance sheet and robust FCF generation capabilities give us the confidence in maintaining a bullish stance as future capital deployment opportunities should unlock value for longterm investors,” he said.
“In an environment of increased market volatility, we believe this return profile is quite compelling for a company with resilient attributes (90 per cent of demand for railway ties and utility poles is driven by maintenance).”
Other analysts making changes include:
* National Bank’s Maxim Sytchev to $67 from $64 with a “sector perform” rating.
“SJ shares have trounced 2022 with a 21-per-cent advance, pushing the 2024 estimated EV/EBITDA to 9.3 times,” he said. “Recall, however, that growth in terms of volumes is likely to remain structurally muted as the company has consolidated its key rail/poles verticals. We are also likely to be past the large pricing hikes we’ve seen in 2022. Resi market is, of course, now facing the uphill interest rate battle. We commend management on advancing towards its 2024 goals but believe the risk/reward profile is generally balanced now.”
* RBC’s Walter Spracklin to $60 from $53 with an “outperform” rating.
“Q4 results came in well ahead of our and consensus expectations, but key from the quarter was commentary on the Utility Pole outlook that pointed to robust demand trends, well ahead of our prior expectations. Management did not comment on the outlook into 2024, but we nevertheless expect demand to remain solid on the back of the US infrastructure bill. We expect management to provide more specific guidance on the long-term outlook at the company’s upcoming investor day on May 25, and view the event as a likely catalyst for the shares,” said Mr. Spracklin
* Scotia Capital’s Benoit Laprade to $60 from $59 with a “sector outperform” rating.
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After better-than-expected fourth-quarter results, a pair of analyst upgraded Nuvei Corp. (NVEI-Q, NVEI-T).
Credit Suisse’s Timothy Chiodo raised the Montreal-based global payments technology company to “outperform” from “neutral” with a US$45 target, rising from US$37. The average target on the Street is US$59.88.
“We downgraded Nuvei to Neutral in mid-2022 ahead of what we expected to be a challenging 2H 2022 given digital assets & cryptocurrency and other mix related headwinds (i.e., our downgrade was focused more on near-term end-market exposure vs. a longer-term share gain/loss dynamic),” said Mr. Chiodo. “We are now past the bulk of the cryptocurrency-related headwinds, with that portion of the business now guided to be mid-single-digit-percentage of revenue going forward. And while compares remain challenging for Q1 & Q2, revenue is expected to accelerate throughout the year on an organic basis and there is a line of sight to a more normalized growth rate, now expected to be in the 20-per-cent-plus range over the mediumterm (adjusted lower for the inclusion of Paya and a reduced [although more attainable] implied outlook for core Nuvei). Importantly, organic FXN revenue was up 26 per cent in Q4 2022 on an ex-digital assets & cryptocurrency basis (vs. reported organic FXN up 10 per cent due to crypto impacts). As we look across our coverage, Nuvei represents a share gaining (2-per-cent growth vs. industry ~M-HSD), eCommerce/CNP focused (~91% of volume exiting 2022 for core Nuvei), profitable (25-per-cent EBITDA margins ex-SBC), now more diversified (Paya adds B2B, Non-profit & Education, Healthcare, Government, & Utilities), initial FY 2023 guidance now de-risked (volume trajectory appears more conservative, albeit with take rates still somewhat in question), and reasonably valued business where numbers and expectations have been re-set lower - as a result, and while macro-related risks remain (discretionary skew even accounting for cryptocurrency’s reduced weighting and Paya-related diversification), we re-adjust our rating to Outperform.”
Elsewhere, CIBC’s Todd Coupland moved Nuvei to “outperformer” from “neutral” and his target to US$50 from US$35.
“Nuvei reported Q4 results that were better than expected,” said Mr. Coupland. “The Q1 and 2023 outlook also came in above expectations. Growth in iGaming, travel and online retail, and unified e-commerce offset weakness from the lower euro and a material reduction in Digital Assets including Crypto (DAC). These trends, along with the Paya acquisition, support the stronger guidance. As Nuvei laps the stronger DAC periods in H1/23, its robust new business trends and wallet-share expansion support a return to double-digit revenue organic growth (up 15 per cent year-over-year) and attractive free cash flow margins (22 per cent) in 2023, with both expected to accelerate further in 2024.”
Other analysts making target adjustments include:
* Raymond James’ John Davis to US$49 from US$40 with an “outperform” rating.
“We are reiterating our Outperform rating on NVEI following solid 4Q results that featured upside to all key metrics (vol/rev/EBITDA) and initial 2023 guidance that was largely as expected (EBITDA in line with our proforma estimate),” said Mr. Davis. “That said, we suspect some conservatism embedded in the outlook (assumes basically no synergies), and believe estimates are biased higher after a volatile 2022. More importantly, we think 2023 is shaping up to be a key turning point where revenue and earnings quality improve as crypto headwinds dissipate in 2H23 (expected to be 5% per cent of revs going forward), Paya is integrated, and other more strategic/predictable verticals experience faster growth (e-com direct). As such, we continue to view the risk/reward very favorably with the stock trading at just ~10x our 2024E EBITDA (inclusive of debt from deal) despite an extremely attractive longer-term growth (20 per cent-plus) and profitability (high 30s margin, still 50-per-cent-plus long-term target) profile.”
* KBW’s Sanjay Sakhrani to US$45 from US$42 with an “outperform” rating.
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A group of equity analysts on the Street raised their forecasts and target prices for shares of Ag Growth International Inc. (AFN-T) following Wednesday’s release of better-than-anticipated fourth-quarter 2022 results and 2023 fiscal guidance.
Shares of the Winnipeg-based company surged 9.7 per cent following the premarket release, which included adjusted EBITDA of $51-million that beat the consensus projection of $47-million. It now expects EBITDA of more than $260-million, “representing continued growth and momentum.”
IA Capital Markets analyst Matthew Weekes said investors should be aware of the company’s ongoing litigation risk surrounding its Farmobile PUC patent, however he raised his rating for its shares to “buy” from “speculative buy” after increasing his short-term estimates, valuation multiples, and medium-term DCF growth rate.
“We believe that (a) the full extent of the litigation is likely overdone; (b) the market is building in at least a partial provision for the risk; and (c) as AFN grows its business and continues to deleverage the balance sheet, the Company is better positioned to absorb any negative outcomes. Our Buy rating is underpinned by AFN’s (a) diversified ag-equipment business serving both Farm and Commercial customers; (b) constructive outlook with projected double-digit Adj. EBITDA CAGR from 2022E-2024E driven by AFN’s focus on organic growth and operational improvements; (c) strengthening balance sheet outlook; and (d) positive secular trends underpinning AFN’s markets,” he said.
Mr. Weekes raised his target for its shares to $67 from $57. The average is $67.46.
Others making changes include:
* Desjardins Securities’ Gary Ho to $74 from $68 with a “buy” rating.
“Although some optimism is reflected in the share price (up 9 per cent Wednesday), we remain bullish on AFN’s robust growth, margin expansion and clear path toward 2.5x leverage in 2024,” said Mr. Ho.
“AFN is entering a new era with three key areas of focus: profitable organic growth, operational excellence and balance sheet discipline,” he added. “Our positive investment thesis is predicated on: (1) broad-based growth across segments and regions; (2) margin expansion through operational excellence; (3) deleveraging; and (4) a step-up in organic growth through product transfers and other initiatives.”
* National Bank’s Maxim Sytchev to $67 from $62 with an “outperform” rating.
“After a well-received Investor Day when we took over coverage, some of the feedback we heard back from the investment community centered around lack of 2023 numerical guidance post the event and generally poor ROIC,” he said. “We believe the former point is well addressed with above-the-Street EBITDA as we continue to explain to investors that looking at (historical) ROIC is predicated on maintenance of the now changed and much more shareholder-friendly strategy. The ROIC metric is highly sensitive to M&A. AFN was VERY insistent at the investor day that M&A is no longer part of the capital allocation approach as all FCF goes down to pay back debt/internal projects. Lower interest expenses (function of moderating leverage) and post-COVID normalization of working capital is how mathematically ROIC gets lifted (all key inputs in ROIC calculation). While ag commodities are coming off the 2022 boil, U.S. farm incomes are still projected to be 15 per cent above 20-year average (down 15 per cent vs. 2022). Rapidly growing international markets of India and Brazil (24 per cent of top line for the two geographies) are therefore bound to take over the baton. Note that multiple expansion is contingent upon deleveraging and ROE/ROIC improvements.”
* Scotia Capital’s Michael Doumet to $75 from $65 with a “sector outperform” rating.
“Prospects for EBITDA growth, enhanced FCF conversion, and B/S delevering – all of which should drive multiple expansion – continue to underpin significant potential upside in the equity,” said Mr. Doumet. “In our view, the 4Q beat, the 2023 guidance, and the positive commentary, demonstrate continued momentum in the business. With backlog up 10 per cent year-over-year to start 2023 and the company indicating that quoting activity remains strong (particularly in Brazil, EMEA, and Food), the prospects for strong growth, on top of the 40-per-cent combined organic growth in 2021/22, highlight sustainable growth and underlying improvement in profitability and FCF generation. We see several areas for upside surprises in 2023, including margin expansion (i.e. more than 100 basis points) and FCF generation (i.e. WC efficiencies).
“Despite the 100-per-cent share price appreciation in since the start of 2022, AFN shares trade at the same EV/EBITDA multiple that it did then. At 7.5 times EV/EBITDA on our 2023E, we see continued room for multiple expansion towards its historical multiple of 9.0 times (and potentially beyond) as the B/S delevers and as the company continues to prove out the sustainability of its improved earnings profile.”
* ATB Capital Markets’ Tim Monachello to $72 from $64 with an “outperform” rating.
‘We continue to see upside for investors as AFN progresses its multi-year, high-return, organic growth strategy, and believe upside from these levels will be driven by 1) multiple expansion back into AFN’s historical trading range (8.5-12.0 times EBITDA), which we believe is justified given AFN’s inflecting return profile (35 per cent/12 per cent ROE/ROIC in 2023, up from 8 per cent/5 per cent in 2022); 2) AFN’s ability to deleverage its balance sheet; and 3) upward revisions to guidance and consensus estimates as AFN gains traction with its strategy including driving operating efficiencies, geographic product transfers, and expansion of complementary business lines,” said Mr. Monachello.
* RBC’s Andrew Wong to $70 from $55 with an “outperform” rating.
“We expect AGI to continue benefiting from strong ag industry tailwinds while the company also executes on its plan to grow sales organically, improve margins, and de-lever with outsized cash generation. We believe shares should rerate back to historical valuation level at 8.5 times EV/EBITDA, with potential upside if the company’s growth and margin expansion plans exceed expectations,” said Mr. Wong.
* CIBC’s Jacob Bout to $72 from $62 with an “outperformer” rating.
* Cormark Securities’ Kyle McPhee to $77 from $73 with a “buy” rating.
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A pair of equity analysts upgraded First Quantum Minerals Ltd. (FM-T) in response to its tentative agreement with Panama on the Cobre Panama dispute.
Raymond James’ Farooq Hamed moved the miner to “outperform” from “market perform” with a $35 target, up from $30 and above the $30.37 average on the Street.
“Overall, the financial elements of the proposed agreement look to be similar to what was initially provided to the market in early 2022 with more details surrounding the downside protection. While the proposed contract still requires public consultation and various approvals, we believe this proposed contract signals a significant reduction in risk at Cobre Panama and moreover for FM and as a result, we are upgrading FM,” he said.
Elsewhere, JP Morgan’s Patrick Jones increased his recommendation to “neutral” from “underweight” with a $28 target, rising from $25.
Others making target changes include:
* Canaccord Genuity’s Dalton Baretto to $36 from $34 with a “buy” rating.
* TD Securities’ Greg Barnes to $34 from $31 with a “hold” rating.
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Ahead of the release of Alimentation Couche-Tard Inc.’s (ATD-T) third-quarter results on March 15, National Bank Financial analyst Vishal Shreedhar said his “favourable view on the shares reflects increasing confidence that ATD’s fuel margins will continue to show strength over time (improvement initiatives) and potential for higher deal flow (acquisitions).”
He’s projecting quarterly earnings per share of 81 cents, up from 16 per cent from 70 cents a year ago and 5 cents above the Street’s expectation. He said that gain will be driven by a “solid” fuel margin in the U.S. and share repurchases, offsetting rising expenses, “unfavourable” FX and aggregate volume declines.
“OPIS data suggests U.S. fuel margins averaged 46.1 cents per gallon during ATD’s Q3,” said Mr. Shreedhar. “We highlight that since Q1/F21, ATD has exceeded OPIS indications by an average of 6.5 c/g.
“Our understanding is that ATD has benefitted from growing scale, improved logistics and the Circle-K fuel rebranding, amongst other factors. We understand that the fuel margin declined through the quarter, although OPIS data indicates a rebound at the end of Q3. We highlight that beyond the quarter, OPIS fuel margins have tapered moderately, averaging 37.4 c/g for the first four weeks of Q4/F23.”
Expecting strength in fuel margins to persist and a rebound in U.S. convenience stores, the analyst raised his 2023 and 2024 revenue and earnings estimates, leading him to bump his target for Couche-Tard shares to $68 from $67 with an “outperform” rating. The average is $71.35.
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Echelon Partners analyst Stefan Quenneville thinks Valeo Pharma Inc. (VPH-T) remains “underappreciated” by investors.
Seeing value in its “growth portfolio potential and operating leverage,” he initiated coverage of the Montreal-based company with a “speculative buy” rating, touting its “industry-leading sales growth and exciting growth prospects layered on a stable, cash flowing base portfolio.”
“As Valeo has executed on its strategic plan to acquire high-growth therapeutic products in recent years, it has grown from $7.5-million in annual revenues in F2020 to a $50.7-million run rate in FQ422, which are expected to breach $60-million for F2023,” he said. “Together, the top six growth products have potential peak revenues of $200-million-plus and should drive the Valeo’s topline above this level in F2028.”
“Powering the Company’s recent revenue growth are the recent launches and acquisitions of Redesca, Canada’s first low molecular weight heparin (LMWH) biosimilar; Enerzair and Atectura, two innovative asthma drugs; Allerject, a next-gen, single-use epinephrine autoinjector; and ophthalmology drugs, Xiidra and Simbrinza. These six growth products build on a stable base portfolio of established specialty and hospital generic products. "
Expecting increased scale to lead to opportunities to “in-license more impactful products” and seeing its adjusted EBITDA margin “trending to positive territory” by the end of fiscal 2023, Mr. Quenneville set a target of $1 per share, representing 82-per-cent upside. The average target on the Street is $1.48.
“We value VPH at $1.00/shr using a 2.2 times F2024 EV/Sales multiple,” he said. “This is a premium to the average of Valeo’s Canadian specialty pharma peers, but a discount to larger, better-capitalized US peers and is justified by VPH’s high expected sales growth, clear line of sight to Adj. EBITDA positive operations, and access to attractive new products stemming from its strong sales force in key therapeutic areas.”
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Seeing it at an “inflection point,” Echelon Capital Partners analyst Mike Stevens initiated coverage of Boardwalktech Software Corp. (BWLK-X) with a “speculative buy” recommendation, touting its “marquee customer validation” and “unbounded” total addressable market.
“After toiling through several years of its start-up/proof-of-concept phase, Boardwalk pivoted in calendar 2018 from a necessary but growth-stifling perpetual license model into its now recurring SaaS [software-as-a-service] platform,” he said. “During this time, SaaS revenues have blossomed from $1.6M in F2019 to an annualized $4.4-million through three quarters of F2023, with current annual recurring revenue (ARR) through $6.2-million-plus. From here, we look for an 40-per-cent three-year compound annual growth rate (CAGR) to F2025 alongside the realization of considerable operating leverage and an EBITDA-positive turn exiting F2024.”
Mr. Stevens thinks Boardwalktech, a Cupertino, Cal.-based company with a market cap of $37.41-million, sits poised to “ramp its top-line organic growth over the next several years while realizing significant operating leverage toward EBITDA profitability exiting F2024.”
“Boardwalk’s innovative technology has received tier one validation by a client roster reflecting a who’s who of Fortune 500 mega-cap companies, including Apple (AAPL-Q), Ernst & Young (EY) (Private), Coca-Cola (KO-N), Levi Strauss (LEVI-N), Onsemi (ON-Q), and Estée Lauder (EL-N), while we believe two unnamed large contract wins represent Citigroup (C-N) and Meta Platforms (META-Q) (formerly Facebook),” he analyst said. “Moreover, these customers are quickly expanding their initial contracts considerably, fuelling a formidable land-and-expand strategy accompanied by a high retention rate.”
“With the aforementioned clients spanning sectors such as hardware technology, accounting, consumer packaged goods (CPG), clothing retail, semiconductor manufacturing, cosmetics, banking, and social media, Boardwalk’s total addressable market (TAM) appears unbounded. Further, ever-increasing organizational pressures to prioritize and adhere to environmental, social, and governance (ESG) mandates are providing added tailwinds around supply-chain visibility and traceability, along with the banking sector’s spotlight on data governance. Meanwhile, companies realize that success on these fronts also translates into vast operational improvements.”
Recommending investors consider Boardwalktech for a long-term investment, Mr. Stevens, currently the lone analyst covering the stock, set a target of $1.30 per share, implying upside of 62.5 per cent from its Wednesday closing price of 80 cents.
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In other analyst actions:
* CIBC’s Jacob Bout increased his Bird Construction Inc. (BDT-T) target to $10 from $9 with a “neutral” rating. Other changes include: Stifel’s Ian Gillies to $13.50 from $13 with a “buy” rating, National Bank’s Maxim Sytchev to $11.50 from $9 with an “outperform” rating, iA Capital Markets’ Naji Baydoun to $10.50 from $10.25 with a “buy” rating and ATB Capital Markets’ Chris Murray to $12 from $11 with an “outperform” rating. The average is $11.25.
“Recall that BDT showed its (strong) hand when management made 2023 commentary around the dividend increase and projected payout ratio. Nevertheless, all the financial metrics that matter are pointing to steady momentum. With investors on edge around the risk profile of projects for some public peers, BDT’s under-the-radar/away-from-P3-projects skew is putting the company’s strategy in a favourable light,” said Mr. Sytchev.
* Coming off research restriction following its $100-million bought deal, Scotia Capital’s Ben Isaacson reduced his Chemtrade Logistics Income Fund (CHE.UN-T) target to $10 from $10.50 with a “sector outperform” rating. The average is $11.21.
“We remain bullish on chlor-alkali as well as CHE’s outlook,” said Mr. Isaacson. “First, caustic remains tight; with selling prices supported by reduced EU chlor-alkali supply, as well as higher (but improving) electricity costs. Second, HCl demand has improved due to increased fracking activity in NA. Third, we expect to see a tailwind in the water treatment business, as raw material costs have started to decline. Fourth, we’re bullish on CHE’s ultrapure acid capacity growth to support the U.S. build-out of semi-conductor capacity.
“However, we’re cautious on how CHE intends to fund that growth. As CHE pursues $75-million in incremental run-rate EBITDA by ‘27, it intends to push leverage to 3.0 times from 2.2 times. It’s understandable why. Without tapping into debt, FCF could be insufficient to cover the divvy this year, based on the mid-points of guidance. While this is rational during a limited period of high growth, as we outline below, 3.0 times could creep toward 4.0 times with a moderation to mid-cycle economics. In that scenario, we believe investors would almost certainly cut multiples.”
* Raymond James’ Daryl Swetlishoff trimmed his Conifex Timber Inc. (CFF-T) target to $1.80 from $1.95 with a “market perform” rating. The average is $1.82.
“We rate Conifex Market Perform given weak near-term earnings and limited upside to our target,” he said.
* Canaccord Genuity’s Mike Mueller cut his Crew Energy Inc. (CR-T) target to $8, below the $8.08 average, from $9 with a “buy” rating.
* Despite a fourth-quarter miss, National Bank Financial’s Shane Nagle raised his target for Ero Copper Corp. (ERO-T) to $24.50 from $22 with a “sector perform” rating, pointing to progress on its growth initiatives. Others making changes include: BMO’s Jackie Przybylowski to $23 from $21 with an “outperform” rating. The average on the Street is $23.95.
“We reiterate our Sector Perform rating as our estimates take into account Ero’s growth profile, incremental exploration potential, near-term expansion opportunities and low operating costs offset by elevated capital/development risks and a premium valuation,” Mr. Nagle said. “Our target has increased by adopting a higher multiple to reflect positive progress to date at Tucumã.”
* CIBC’s Krista Friesen raised her Linamar Corp. (LNR-T) target to $86, matching the average, from $80 with an “outperformer” rating, while Raymond James’ Michael Glen bumped his target to $84 from $82 with an “outperform” rating.
* Stifel’s Andrew Partheniou cut his Trulieve Cannabis Corp. (TRUL-CN) target to $25 from $34 with a “buy” rating. Others making changes include: ATB Capital Markets’ Kenric Tyghe to $28 from $32 with an “outperform” rating, Alliance Global Partners’ Aaron Grey to $24 from $33 with a “buy” rating, BTIG’s Jonathan DeCourcey to $21 from $26 with a “buy” rating, Echelon Partners’ Andrew Semple to $30 from $40 with a “buy” rating, Eight Capital’s Ty Collin to $20 from $40 with a “buy” rating and Canaccord Genuity’s Matt Bottomley to $40 from $44 with a “buy” rating. The average is $31.
“TRUL reported Q4/22 earnings and provided 2023 guidance that were below expectations, mainly driven by competition, customers trading down from mid-tier to value, limited wholesale opportunities and a longer time for JeffCo to lower production costs than previously anticipated,” Mr. Partheniou said. “Putting together the puts and takes, we now estimate TRUL’s normalized OCF stands at $100-million, still a significant re-rating from 2022′s $25-million and representing an attractive 8.5-per-cent 2023 estimated OCF yield, roughly in-line with the Tobacco industry average and 150 basis points above the Alcohol industry average as well as 100 basis points above its close cannabis peers. As a result, we believe investors are getting paid to wait for the ultimate TRUL catalyst of FL REC, which currently is demonstrating good progress to reach the 2024 ballot and ultimately be successful. Hence, we right-size our estimates, driving our lower price target while retaining our positive bias.”
* RBC’s Greg Pardy lowered his Vermilion Energy Inc. (VET-T) target to $27 from $29 with a “sector perform” rating, while BMO’s Mike Murphy cut his target to $23 from $25 with a “market perform” rating. The average is $32.38.
“Vermilion continues to make progress towards reestablishing its premium framework characterized by free cash flow generation and a strong balance sheet,” said Mr. Pardy.
* Canaccord Genuity’s Aravinda Galappatthige bumped his Verticalscope Holdings Inc. (FORA-T) target to $11 from $10 with a “buy” rating. The average is $12.86.
“Given that much of the quarter (including MAUs) were pre-released over a month earlier, the headline results were not too relevant,” he said. “However, the company did indicate its expectations for the year in terms of the quarterly cadence, guiding towards a weak Q1/23 not too dissimilar from Q4, but calling for a recovery in Q2 and beyond. Management believes that some of its new product innovations on the programmatic side would start to yield higher returns starting in Q2 followed by its product discovery initiatives. However, details on these projects are limited at this point, with greater colour expected with Q1 reporting. On another note, while the earnout for 2022 with respect to The Streamable of $15-million was paid out in January, management wrote down the contingency around the second year by $6.3-million to $1.1-million. Given we had incorporated this in our forecasts, it served to improve the balance sheet outlook going into F2024. On the negative side, this highlights a material reduction in revenue upside from this asset given moderated customer acquisition spend by SVOD platforms.”