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

National Bank Financial analyst Jaeme Gloyn sees Fairfax Financial Holdings Ltd. (FFH-T) as “a mispriced large-cap financial,” calling its stock the “best value idea” in his coverage universe and raising his target for its shares to a new high on the Street on Tuesday.

In a research report previewing Thursday’s after-market release of its fourth-quarter financial results, he pointed to “two key themes investors commonly overlook.” They are:

1. Fairfax Financial’s ability to deliver “rapid and profitable premiums growth.”

“Given persistent hard market conditions, we expect premiums growth to exceed 20 per cent in 2021 and to remain in the double-digits through 2022,” he said. “Moreover, we anticipate Fairfax will sustain profitable underwriting, in line with the company’s 10-year average combined ratio of 96 per cent.”

2. The expectation for “rapid growth in the investment portfolio and improving returns ease the burden to achieve double-digit ROEs.”

“Invested assets of $52-billion as at Q3-21 are up 26 per cent year-over-year,” he added. “FFH’s 5-year average annual total return on its investment portfolio is almost 5.6 per cent (climbing from 2 per cent in 2017). Assuming a 96-per-cent combined ratio, we estimate FFH only needs to deliver a total return on investments of 4 per cent to reach our 12-per-cent ROE forecast in 2023. Crucially, nearly half of that total return comes from ‘locked-in’ interest & dividend income that stands to benefit from rising short-term interest rates given FFH’s 37-per-cent allocation to cash and short-term investments.”

Maintaining an “outperform” recommendation for Fairfax, Mr. Gloyn raised his target to $1,000 from $825. The average is currently $802.77.

“Still trading below book value at approximately 0.85 times, the market is pricing FFH at an ROE of 6 per cent,” he said. “We believe FFH can deliver sustainable long-run ROE in the doubledigits through a combination of consistently strong underwriting growth/profits and improving total investment return performance. Based on sector trading multiples today, double-digit ROE merits a valuation multiple above book value. In fact, our 2023 ROE forecast of 12 per cent implies a P/B multiple of more than 1.5 times. We apply a 1.1 times P/ B multiple (was 1.0 times) on our Q4 2022 estimate to arrive at our Cdn$1,000 price target ... Moreover, we anticipate FFH will continue to chart a more shareholder friendly course in the coming quarters that firmly started with the value surfacing sale/buyback transaction in late 2021.”


In a separate research note, Mr. Gloyn said he sees the P&C Insurance industry “well positioned” for 2022.

“Increased climate volatility, ongoing claims inflation, and low investment yields will sustain current hard markets conditions (i.e., rising premium rates, strong premiums growth, and expanding profitability),” he said. “Rising interest rates [support] a bottoming – then improving – investment returns outlook over time. Near-term, FFH stands to benefit most given the company’s 37-per-cent allocation to cash and short-term investments.”

He also thinks the work-from-home trend will continue, helping to sustain “strong” profitability in Personal Auto lines, given a reduced driving frequency, and Personal Property, expecting owners to increase maintenance and monitoring.

Accordingly, Mr. Gloyn anticipates the industry will build on its “solid” share price performance in 2021.

“Trisura Group (TSX: TSU) led our coverage universe, delivering shareholders a “double”, up 114 per cent on the year,” he said. “Fairfax Financial (TSX: FFH) appreciated 43 per cent, outperforming the S&P TSX Financials return of 32 per cent. Definity Financial (TSX: DFY) generated a 9-per-cent return in just over 6 weeks as a public company, outperforming the 1-per-cent return of the Financials index over the same period. While Intact Financial (TSX: IFC) lagged the index in 2021, the stock delivered a respectable 9-per-cent return.”

The analyst raised Trisura Group Ltd. (TSU-T) remains at the top of his pecking order, emphasizing its “rapid growth outlook and valuation upside.”

Keeping an “outperform” rating, he raised his target for its shares to $65 from $62. The average target is $57.64..

“TSU currently trades at approximately 25 times consensus 2022 EPS,” said Mr. Gloyn. “The target valuation premium reflects i) our view TSU will execute on our robust revenue/earnings growth forecasts, ii) premium valuations in the insurance peer group, and iii) premium valuations ascribed to specialty lines focused companies delivering consistent double-digit ROE/EPS growth. We reiterate that significant valuation upside remains as i) the U.S. fronting platform continues to prove out its industry-leading growth trajectory and expands its share of TSU profitability and ii) Canada boasts strong momentum as market share gains, new products, and persistent hard markets support even more rapid growth than the U.S. platform.”

He also raised his target for Intact Financial Corp. (IFC-T) to $219 from $215, exceeding the $198.42 average, also with an “outperform” rating.

“IFC merits a premium valuation as we expect the company will i) successfully integrate and operate RSA’s Canada and UK&I operations (delivering on synergy upside); and ii) produce roughly mid-teens OROE through 2023 and beyond. Whiles risk to personal auto profitability has risen given inflationary forces, we believe rate increases will continue to outpace loss cost trends,” he said.


While acknowledging the impact of persistent advertising headwinds, Echelon Capital Wealth analyst Rob Goff said he sees his bullish view on AcuityAds Holdings Inc. (AT-T) as “as an attractive albeit contrarian call.”

“We believe the current EV [enterprise value] of $126.5-million reflects an overly negative scenario for the Company’s legacy business while discounting AT’s secular growth drivers in illumin and CTV,” he said. “We believe current valuations discount consensus expectations, reflect exaggerated headwinds around privacy concerns, forget about the 25 per cent of revenues lost to Covid that could return at some point and discount the scale and momentum of secular drivers in illumin and CTV.”

“With Q321 illumin revenues of $7.4-million together with our estimated CTV revenues at $1-$2-million (excluding those within illumin), we have their combined revenues pushing $30-million for 2021 from $5-million in 2020. We put our combined illumin/CTV revenues at $45-$50-million for 2022 where an estimated $10-million could represent business moving from the legacy UI3 platform onto the user experience enhanced illumin; based on an estimated 20 per cent of illumin revenues being sourced from the migration of ‘legacy’ business. For 2022, we have an estimated 30 per cent of revenues being derived from the two transformative drivers.”

Despite his optimistic view and “speculative buy” recommendation, Mr. Goff cut his target for the Toronto-based company’s shares to $9 from $14, citing “the privacy related headwinds along with the ongoing overhang associated with investors waiting for partial deployment of the Company’s cash balances.” The average on the Street is $9.65.

“For full disclosure, we saw further upside from even peak levels where we considered the Company’s secular growth prospects and the traction of AT’s illumin and CTV businesses,” he said. “Our estimated 20-per-cent transition of clients from UI3 to illumin supports our view of a more favorable mix of business for the future, and our considered near term increase in operating expenditures represents our view of the investments necessary to achieve our bullish outlook driven by client adoption of the illumen platform.”

“We look for quarterly momentum in illumin/CTV sales to be well received. Furthermore, evidence that non-illumin business remains solid should address concerns towards its decline. Evidence of a return from Covid-10 sensitive accounts would support positive forecast revisions and improve sentiment. Investors will clearly await acquisitions and updates on the Company’s acquisition parameters as the $100-million of cash represents almost half its market capitalization of $220-million.”


Emphasizing silver-dominant deposits are “a scarce asset, Desjardins Securities analyst Jonathan Egilo initiated coverage of a trio of “high-quality” silver companies at different stages in their mining lifecycle with “buy” recommendations on Tuesday, believing they offer investors “an array of options for gaining silver exposure.”

“All three companies within our initiation report not only offer investors more leverage to silver, but would also increase the relative silver exposure of all previous silver producers mentioned, driving takeout appeal,” he said. “In addition to higher-than-average silver exposure, all three companies offer near pure-play precious metals exposure rather than base metals. "

He called SilverCrest Metals Inc. (SIL-T) an “imminent silver producer,” setting a target of $15.25 per share. The current average on the Street is $15.04.

“The company is at the optimal position on the Lassonde Curve as it completes its construction of Las Chispas on schedule and on budget, and should start generating significant FCF [free cash flow] in 2H22 (we estimate a 15.2-per-cent FCF yield average over its first two full years of production),” said Mr. Egilo. “As SilverCrest is a high-grade, underground silver miner, with expectations that it will continue extending the minelife, we believe the stock should trade near the top of the silver producer peer group. SilverCrest is through the major capex risk of its development with 86% of construction completed at year-end 2021, and the low-cost operation makes the stock relatively less sensitive to the volatility in silver prices. The company also has a highly respected management team which has successfully transitioned development projects to FCF machines before (the Santa Elena mine) and has proven to be impeccable stewards of investor capital.”

He called GoGold Resources Inc. (GGD-T) a “development story that keeps getting bigger and better,” setting a $4.50 target, which falls just below the $4.71 average.

“Although GoGold owns and operates the Parralsilver mine which produces approximately 2moz Ageq [silver equivalent] annually, its flagship project and the driver of the story is the continuation of growth and advancement at Los Ricos,” he said. “Through the recent Los Ricos North maiden resource estimate, Los Ricos North and South combined have 250moz Ageq — at very high grades for an open pit mine — which has launched Los Ricos as one of the best undeveloped silver projects in the world. Through 100km of drilling over 18 months in Los Ricos North, 160moz Aueq of maiden resources were delivered. With another 100km of expansionary drilling in Los Ricos North set for 2022, management is keeping its focus on resource growth.”

Referring to it as “a silver exploration stock,” he set a $1.25 target for shares of Silver Tiger Metals Inc. (SLVR-X), below the $1.39 average.

“The El Tigre district has a long history of highgrade silver-gold mining,” said Mr. Eglio. “However, a recent discovery and geological phenomenon has transformed the entire scope of drill programs moving forward. In late 2020, the company made a new high-grade discovery through a horizontal shale layer, assumed to be barren of metals. When multi-kilogram assays of silver-equivalent were returned, Silver Tiger began testing for more of this previously unknown phenomenon. Over 2021, similar shale intercepts have been found all over the property, infusing a new layer of excitement into the El Tigre project. While the elevated grades seen through the shale layer are not unprecedented at El Tigre, the thickness of these shale intercepts is.”


Canaccord Genuity analyst David Hynes thinks Coveo Solutions Inc. (CVO-T) is off to a good start as a public company after reporting “solid” results in its first quarter since its initial public offering late last year.

“Coveo delivered strong performance across all four of its lines of business, but particularly in commerce, resulting in its largest organic bookings quarter to-date, and a more than 100-per-cent increase in commerce bookings even excluding Qubit (which was acquired in October),” he said. “Coveo also meaningfully exceeding bookings targets for its solutions integrations with the likes of SAP, Adobe, and Zendesk, and its EMEA bookings represented over 25 per cent of total this period, growing more than 100 per cent organically. SaaS revenue of $21.2-million grew 50 per cent year-over-year while total revenue of $23.2-million grew 39 per cent year-over-year ... While organic growth was not explicitly disclosed, management emphasized that organic SaaS revenue growth accelerated from the 31 per cent delivered last quarter – we estimate the number was likely in the 32-35-per-cent range.

Though he raised his financial expectations following the release of its first formal guidance, Mr. Hynes reduced his target for its share to $15 from $18 with a “buy” rating based on a “reset in sector multiples that we expect will normalize to a lower level than we’ve seen over the last 18 months.” The average target on the Street is $16.83.

“If we step back, there’s a lot of money being put into technologies that improve key customer touchpoints and, in our view, there are really none more important than commerce and support,” he said. Coveo’s AI-driven search relevance platform helps to drive better user experiences, higher conversion rates, enhanced self-service, supports agent efficiency, etc. – all pretty important improvements. And then when you look at a customer roster that includes the likes of Salesforce, Dell, Workday, Xero, Ecolab, Acuity, Rolex, Comcast, Bain, etc. you start to get the sense that Coveo is solving important problems for some really big companies. As this value is better realized inside these large organization, we think there’s a path to improved net revenue expansion and sustainably faster growth from here. It’s our view that Coveo should be a 35-per-cent-plus subscription grower for at least the next few years, which at 8 times EV/R [enterprise value to revenue] on calendar 2023 estimates, sets up favorably for a stock that should steadily work higher.”

Others making changes include:

* Scotia Capital’s Paul Steep to $16 from $18 with a “sector perform” rating.

“Coveo Solutions [Monday] reported Q3 results that were above our and consensus expectations, driven by stronger-than-anticipated subscription revenue growth in the period,” he said. “We note that the Q3 numbers contained a number of one-time items related to the firm’s IPO which saw changes to its capital structure that are not expected to recur in future quarters.

“We believe Coveo’s shares offer investors a way to participate in the trend for organizations to provide all stakeholders with more relevant and timely information, benefiting from the theme of digital information growth and the need to organize, search, and find relevance. We believe Coveo will continue to deliver strong double-digit top-line growth over our forecast horizon, with continued demand for cloud-based search and relevance software from both new and existing customers.”

* BMO Nesbitt Burns’ Thanos Moschopoulos to $17 from $20 with an “outperform” rating.

“We remain Outperform on Coveo following Q3/22 results, based on our view that the stock is trading at too steep of a discount to SaaS comps relative to its growth rate, and relative to its strong market position in the large and fast-growing TAM in which it competes. Results were above consensus for both the quarter and for Q4/22 guidance and demonstrative of an acceleration in organic SaaS revenue growth. We’ve raised our estimates, but have trimmed our target price to reflect the recent multiple compression across the SaaS universe,” he said.

* RBC’s Paul Treiber cut his target to $18 from $20 with an “outperform” rating.

“Coveo reported solid Q3 (Dec-qtr) results, with revenue above consensus and acceleration in organic growth. Bookings reached a record quarterly high for the company. We believe the demand that Coveo is seeing is likely to be sustained, given the breadth and momentum from digital transformation initiatives. Maintain Outperform, as we see Coveo achieving solid growth and we expect Coveo’s discount to peers to narrow,” said Mr. Treiber.


Ahead of the fourth-quarter earnings season for Canadian Energy Infrastructure companies, Credit Suisse analyst Andrew Kuske made a pair of rating changes.

He upgraded Keyera Corp. (KEY-T) to “outperform” from “neutral” with a $36 target. The average is $34.06.

Conversely, he lowered TC Energy Corp. (TRP-T) to “neutral” from “outperform” with a $70 target, exceeding the $67.39 average.

“In terms of positioning, the continued rise in prices of multiple hydrocarbons is a general tailwind for the sector and much of the Canadian market,” Mr. Kuske said. “That kind of environment favours some underlying dynamics for regional energy infrastructure stocks versus those with larger cross-continental footprints. Yet, for some, some of the U.S. peers offer more ‘torque’ with typically greater volumetric and margin exposure and, for others, pure producer exposure is more attractive at this stage of the cycle.”

“In terms of sub-sector performance and bias, we continue to prefer the power/renewables sector partly on the basis of valuation, positioning and the longer-term growth opportunity. At this juncture, the energy infrastructure sector positioning requires more nimble trading in our view – largely attributable to the variety of factors impacting commodity price direction and associated sentiment. Even in that context, we believe some interesting tactical positioning along with value opportunities exist. Given these views, we continue to prefer the unique hybrid positioning and valuation of AltaGas Ltd. (ALA) and now highlight the dynamics facing Keyera Corp. (KEY) along with a value orientation of Tidewater Midstream & Infrastructure (TWM). As with other parts of our coverage universe, we continue to believe interest rates create challenges with near-term funds flow (especially for the Utilities sub-sector), however, there is an appeal for long-duration assets from many parts of the capital market (e.g. pension and private equity).”


Previewing fourth-quarter earnings season for TSX-listed precious metals companies, equity analysts at Stifel made a series of target price adjustments on Tuesday.

“In our view the key quarterly themes will be: (1) 2022 guidance with particular attention given to cost expectations as inflation is a real headwind, (2) reserve / resource updates, and (3) return of capital to shareholders – as it is typical of the end of year, we would expect gold miners to review capital allocation plans and potentially make announcements on dividend increases and/or share buybacks. It’s important to note that despite inflation headwinds, gold miners are still generating robust cash flows,” the firm said.

They raised their targets for

  • Franco-Nevada Corp. (FNV-T, “hold”) to $200 from $195. The average on the Street is $203.72.
  • Americas Gold and Silver Corp. (USA-T, “hold”) to $1.25 from $1.20. Average: $1.73.

The analysts lowered these stocks:

  • Eldorado Gold Corp. (ELD-T, “buy”) to $20.25 from $21.50. Average: $19.75.
  • Nomad Royalty Company Ltd. (NSR-T, “buy”) to $21 from $21.50. Average: $16.13.
  • Argonaut Gold Inc. (AR-T, “buy”) to $4 from $5. Average: $3.85.
  • Equinox Gold Corp. (EQX-T, “buy”) to $17 from $20. Average: $12.13.


In other analyst actions:

* Ahead of Thursday’s release of its fourth-quarter financial results, Scotia Capital analyst Mario Saric bumped up his Brookfield Asset Management Inc. (BAM-N, BAM.A-T) target to US$70.25 from US$70 with a “sector outperform” rating. The average is US$69.79.

“BAM is down 9 per cent year-to-date (implied asset manager down 14 per cent), lagging peers by 3 per cent and extending under-performance during COVID,” he said. “We attribute the weakness to market concerns over inflation and higher rates. ... It is interesting to see BAM lag U.S. Financials despite the 49 basis points yield curve flattening since October 2021 (BAM has outperformed U.S. Financials 100 per cent of the time since 2010). We’ve talked about BAM’s higher balance sheet capital perhaps driving a bit of the discount to some peers (i.e. market preference for “capital-light” models). However, higher inflation could help BAM’s Invested Capital (i.e., BIP reported 9-per-cent year-over-year organic growth in 2021 on inflation indexation). Overall, we still view the 2022 macro as constructive for BAM share price outperforming broader benchmarks.”

* After its Investor Day event on Monday, Canaccord Genuity analyst Shaan Mir lowered his Valens Company Inc. (VLNS-T) target to $9, below the $10.94 average, from $11 with a “speculative buy” rating, while Desjardins Securities’ John Chu cut his target to $3.25 from $3.50 with a “buy” recommendation.

“The Valens team provided a detailed business plan for 2022, which included additional cost savings, an update on its momentum (listings, sales growth, market share, new products), its U.S. opportunity and the continued transition toward a B2C business model, all of which are encouraging. However, it also provided financial guidance that led us to cut our forecasts,” said Mr. Chu.

* Raymond James analyst Jeremy McCrea increased his Obsidian Energy Ltd. (OBE-T) target to $11 from $9 with an “outperform” rating. The average on the Street is $7.50.

“In our view, Obsidian’s outstanding reserve report [Monday] emphasizes the Company’s operating performance we’ve seen in the Cardium over the last year and should further support the Company’s share price momentum,” he said. “With the shares trading roughly in-line with PDP value with an updated reserve report (done at $76 WTI), the shares continue to discount the potential in both the Company’s improving Cardium results and the Clearwater upside. The improving operating results should also lead to accelerated deleveraging through 2022 (with service costs becoming less and less of field cash flow). We maintain our Outperform rating given the combination of improving operations, accelerating debt reduction, and the Clearwater potential to drive a market re-rating of the shares.”

* Raymond James’ Brian MacArthur cut his target for Wheaton Precious Metals Corp. (WPM-N, WPM-T) to US$54 from US$55, below the US$55.51 average, with an “outperform” recommendation.

* Wells Fargo analyst Michael Blum lowered his targets for Ballard Power Systems Inc. (BLDP-Q, BLDP-T) to US$11 from US$18 and Canadian Solar Inc. (CSIQ-Q) to US$31 from US$44, keeping “equal weight” ratings for both. The averages are US$19.07 and US$48.06, respectively.

“We’re lowering price targets across our renewables coverage universe by a median 19 per cent to reflect a change in market multiples,” he said. “This re-calibration reflects broader macro trends, where inflation is driving an expectation of higher interest rates and quantitative tightening, driving a broad sector rotation from growth to value, and away from tech / renewables. We’ve lowered the assumed EV/sales and EV/EBITDA multiples used to derive our price targets to reflect these changes. While we’re not making any ratings changes, we favor solar inverters on a relative basis within our renewables universe. We remain cautious on the renewables sector as the specter of rising rates combined with failure (so far) to pass Build Back Better (renewable tax credits) is likely to continue to weigh on performance near term. While momentum could shift if inflation cools (back to growth from value), we remain cautious for now. "

* TD Securities analyst Graham Ryding cut his targets for Sprott Inc. (SII-T, “buy”) to $55 from $61, CI Financial Corp. (CIX-T, “hold”) to $28 from $32 and Fiera Capital Corp. (FSZ-T, “hold”) to $11 from $11.50. The averages on the Street are $59.82, $32.22 and $11.50, respectively.

* MKM Partners analyst William Kirk lowered his targets for Canopy Growth Corp. (WEED-T, “buy”) to $17 from $28 and Aurora Cannabis Inc. (ACB-T, “neutral”) to $6 from $8. The averages are $11.88 and $6.99, respectively.

* RBC Dominion Securities analyst Geoffrey Kwan cut his TMX Group Ltd. (X-T) target to $151, exceeding the $149.29 average, from $157 with a “sector perform” rating, while National Bank Financial’s Jaeme Gloyn lowered his target to $139 from $147 with a “sector perform” recommendation..

“Although Q4/21 adjusted EPS was slightly below our forecast, we think overall fundamentals remain positive with strong capital raising activity and derivative trading volume offsetting weaker equity trading volume,” said Mr. Kwan. “Trayport’s growth continues to trend in the right direction, which, together with a successful integration of AST Canada, could drive valuation upside over time. Furthermore, with a healthy balance sheet, we think the TMX is well positioned to make an opportunistic acquisition.”

* CIBC World Markets analyst Jamie Kubik raised his target for PrairieSky Royalty Ltd. (PSK-T) to $22 from $20 with a “neutral” rating, while RBC’s Luke Davis bumped up his target to $19 from $18 with a “sector perform” rating. The average is $19.41.

“PrairieSky posted a solid quarter with improved payor activity and strong pricing factoring in. Oil volumes trended sequentially higher as producers continue to deploy incremental capital to oil plays; we expect this will provide a solid backdrop for 2022 and the potential for volume outperformance if pricing holds in,” said Mr. Davis.

* Cowen and Co. analyst Jeffrey Osborne cut his target for Westport Fuel Systems Inc. (WPRT-Q, WPRT-T) to US$2.50 from US$4 with a “market perform” recommendation. The average is US$7.60.

* Piper Sandler analyst Charles Neivert raised his Methanex Corp. (MEOH-Q, MX-T) target to US$49 from US$46, below the US$51.92 average, with a “neutral” recommendation.

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