Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Cenovus Inc. remains Citi analyst Prashant Rao’s top pick in the Canadian oil and gas sector despite a merger-related drop in profit expectations,
“We are updating our estimates to reflect CVE’s solid core 3Q Upstream performance. Incorporating the company’s latest guidance and Citi’s updated commodity price assumptions, we are lowering our 4Q20E FFO/sh to C$0.33 (from C$0.42) and 2021E FFO/sh slightly to C$2.37 (from C$2.43). CVE remains our top pick through the trough, given its low operating costs and best leverage to a better WCS [West Canada Select crude] environment, even after the net impact of the prospective HSE merger (neutral to intermediate-term valuation, as op cost takeout offsets lower quality HSE assets). Our C$8 TP remains unchanged.”
“@SBarlow_ROB Cenovus is Citi’s top pick in the Cdn large cap oil and gas sector” – (research excerpt) Twitter
“Friday’s analyst upgrades and downgrades” - Globe Investor
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Scotia strategist details Canadian earnings season at the halfway point – results are coming in strong (my emphasis),
“TSX Q3/20 EPS now stands at C$222, 7.6% above the consensus number from October 13. The scale of the surprise is on par with Q2′s beat of 8.4% and among the best performances of the last 20 years. Lack of guidance and rapidly swinging macro conditions likely explain sell side conservatism in Q3/20 forecasts, allowing a record-high 70% of companies to beat by a median margin of 11% (only slightly lower than Q2/20′s record high of +12%). Nonetheless, top-line results [revenue] are more sobering, with a 4.5% overall miss… cyclicals have seen their median revision post-earnings announcement gain for a third consecutive quarter in a row. Meanwhile, Resource and Defensive names have typically seen their profit forecasts stay unchanged after releasing results. Still, both Cyclicals and Resources have had noticeably positive stock price reactions post–earnings publication, as investors see evidence of a lasting bounce. Defensives have fared rather badly, especially because of large-scale misses in Utilities.”
“@SBarlow_ROB BNS: TSX earnings coming ins strong, sales a miss” – (research excerpt) Twitter
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Video game stocks have been major beneficiaries of quarantine and Morgan Stanley sees growth ramping up even further for Take Two Interactive,
"TTWO (Raise PT to $200, Remain OW[overweight] : TTWO’s strong results – F2Q revenue/EPS 9%/30% better than expected and the top end of new FY21 revenue/EPS guidance 7%/10% above our previous forecast – showcase its ability to drive gamer engagement and monetization across its game ecosystems … We continue to believe content investment and innovation is critical to attracting/retaining gamers and wallets…and are therefore optimistic on GTA’s [Grand Theft Auto] ability to drive earnings power the next 2 years even prior to any full new release. First, GTA Online will get a “major update” over the next 6 months featuring new heists, activities, and a new location. In addition, GTA V is coming to the next generation of consoles in the second half of calendar 2021″
“@SBarlow_ROB MS likes Take Two” – (research excerpt) Twitter
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Diversion: “Contact Lens-Removing Robot Requires More Faith in Technology Than I’ll Ever Have” – Gizmodo
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Scott Barlow