Skip to main content

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

Cargojet Inc.’s (CJT-T) growth outlook remains “positive” after better-than-expected first-quarter financial results, according to National Bank Financial’s Cameron Doerksen.

However, he was one of a group of equity analysts on the Street to trim their targets for the Mississauga-based company following Monday’s release, which sent its shares up by 2.3 per cent, as concerns over sector valuations continue to linger.

“Based on our updated forecast, Cargojet shares are currently trading at 8.4 times current year EV/EBITDA and 8.0 times next year, both of which are a discount to the historical forward average for the stock of 9.2 times,” said Mr. Doerksen. “We see upside to the share price in the near-to-medium-term being mainly driven by valuation multiple expansion. However, multiples across the transportation universe have meaningfully contracted in recent months as the market becomes increasingly concerned over the prospects for a potential economic slowdown.”

Before the bell on Monday, Cargojet reported total revenue of $233.6-million, up 46 per cent year-over-year and above both Mr. Doerksen’s $213-million estimate and the consensus forecast on the Street of $206-million. Adjusted EBITDA and earnings per share of $83-million and $1.76 also topped projections ($78-million and $1.67 and $73-million and $1.43, respectively).

Seeing the demand for both package deliveries and air cargo “still strong” and the air cargo market remaining “relatively tight,” Mr. Doerksen expressed confidence in the company’s ability to log “solid” growth over the next several years.

“While concerns about an economic slowdown are growing, Cargojet is arguably better positioned than many transportation companies,” he said. “Indeed, the company’s recently signed long-term contract with DHL locks in ACMI growth through 2023 while also significantly de-risking the acquisition of larger 777 freighters in late 2023 and beyond. Cargojet’s key domestic overnight customers are also still forecasting growth in e-commerce that should support the company’s volumes.”

Despite that bullish view, he emphasized the concern about its valuation, leading him to cut his target to a Street-low of $185 from $199 with a “sector perform” rating. The average is currently $239.67.

“We still have some long-term concerns for Cargojet regarding future competition and increased industry cargo capacity growth, but with its strong market position, most of its business locked into long-term contracts, and with no direct exposure to higher fuel prices (which are a pass-through to customers), Cargojet is better positioned than many transportation companies to manage the current market challenges as well as any potential economic slowdown ... Our forecast for CJT already assumes solid EBITDA growth over the next two years, so we see upside to the share price in the near-to-medium-term being mainly driven by valuation multiple expansion. However, multiples across the transportation universe have meaningfully contracted in recent months as the market becomes increasingly concerned over the prospects for a potential economic slowdown,” he said.

“With modest 21-per-cent upside to our target, we keep our Sector Perform rating, but would recommend investors look to add the stock on any significant further price weakness.”

Other analysts making target reductions include:

* BMO’s Fadi Chamoun to $200 from $220 with an “outperform” rating.

“First-quarter results were above consensus expectations with management continuing to capitalize on tight market conditions. We see CJT as well positioned to navigate a potentially easing freight demand outlook given the company’s multi-year contracted business model and strong execution,” said Mr. Chamoun.

* Scotia’s Konark Gupta to $197 from $215 with a “sector perform” rating.

“While our estimates have increased, we think investor concerns about slowing consumer growth could maintain pressure on valuation,” said Mr. Gupta.

* CIBC World Markets’ Kevin Chiang to $207 from $236 with an “outperformer” rating.

Conversely, analysts raising their targets include:

* ATB Capital Markets’ Chris Murray to $230 from $225 with an “outperform” rating.

“We maintain our positive outlook on CJT and see strong demand for ACMI [Aircraft, Crew, Maintenance and Insurance] providing greater visibility into how increased capacity will be filled while maintaining margins and ROIC metrics.” he said. “We continue to view valuations as compelling, particularly for longer-term investors, adding that CJT announced the initiation of an NCIB and a 10-per-cent dividend increase with Q1/22 results.”

* TD Securities’ Tim James to $225 from $210 with a “buy” rating.


Capital Power Corp.’s (CPX-T) “strong” first-quarter results places it in a solid position to easily exceed its 2022 guidance, according to iA Capital Markets analyst Naji Baydoun, who emphasized its growth outlook remains intact.

Shares of the Edmonton-based utility gained 3.5 per cent on Monday after reporting earnings before interest, taxes, depreciation and amortization of $348-million, easily beating both Mr. Baydoun’s $290-million estimate and the consensus projection of $304-million. Adjusted funds from operations of $1.72 per share also blew past the analyst’s expectation ($1.31).

“Strong performance from CPX’s Alberta assets was driven by both higher generation and realized power prices,” he said. “The Company’s Ontario facilities also performed well, primarily driven by higher-than-expected contributions from Goreway.”

“Given the strong Q1/22results and the outlook for the remainder of the year, CPX noted that it is on track to meet or exceed the upper ends of its financial guidance for the year.”

After successfully commissioned its first Canadian solar project, the 41MW Strathmore project in Alberta, and a 10-year agreement with a counterparty for 126MW at the Whitla Wind 2 & 3 facilities in Alberta, Capital Power is expected to aggressively pursue growth projects through 2022. Mr. Baydoun thinks it could execute on M&A opportunities over the near term beyond what is already incorporated into its valuation.

Citing “higher near-term financial estimates, driven by strong Alberta power market fundamentals,” he raised his target for Capital Power shares to $45 from $44, keeping a “hold” rating. The average on the Street is $45.69.

“CPX offers investors (1) a mix of contracted and merchant cash flows, (2) long-term leverage to the Alberta power market, (3) some growth (low single-digit FCF/share growth through 2026), (4) an attractive income profile (5.5-per-cent yield, 5 per cent per year dividend growth through 2025, with an 45-55-per-cent payout), and (5) a discounted relative valuation versus IPP peers,” Mr. Baydoun said.

Other analysts making target changes include:

* ATB Capital Markets’ Nate Heywood to $45 from $44 with a “sector perform” rating.

“In the near term, we expect Capital Power to continue investing heavily in growth initiatives, with a significant focus on the Genesee 1 & 2 repowering, accompanied by recent efforts on carbon capture and renewable projects in both Canada and the U.S.,” said Mr. Heywood. “Additionally, management has previously expressed an appetite in natural gas generation M&A, focused on midlife assets with attractive contracting profiles. The Company continues to improve its contracted cash flows through PPAs, which we expect to be a consideration in any potential development and M&A activity. The Company boasts an attractive dividend yield of 5.0 per cent, supported by a modest 2022 payout ratio of 42 per cent.”

* Desjardins Securities’ Brend Stadler to $48 from $46 with a “buy” rating.

“In our view, CPX offers investors deep value as we believe it is mispriced,” said Mr. Stadler. “It offers near-term exposure to a strong Alberta power market and the hot renewables market, but also provides a unique re-rate angle as it works to remove coal (by 2023). Longer-term, we believe another re-rate is possible as CPX cleans up its strategically important natural gas assets through a hydrogen/carbon capture, utilization and storage solution.”

* RBC Dominion Securities’ Maurice Choy to $45 from $42 with a “sector perform” rating.

“Capital Power delivered a solid Q1/22 result (helped in part by better-than-expected hedging/trading activities), which we believe underscores the company’s strong Alberta power market-driven cash flow generation in the near-term, including in 2022 (we expect guidance to be upgraded potentially at the Q2/22 results event),” he said. “Investors may also look forward to potential M&A activity and policy clarity (including as it relates to the performance standards for unabated gas generation assets) later this year. Whilst we believe the stock is fairly valued, we see income-oriented investors being drawn to the company’s secure and growing dividend rate, which implies a 5-per-cent dividend yield.”

* BMO’s Ben Pham to $43 from $42 with a “market perform” rating.

* TD Securities’ John Mould to $51 from $50 with a “buy” rating.

* CIBC’s Mark Jarvi to $45 from $44 with a “neutral” rating.


Ahead of earnings season for Canadian asset managers, Scotia Capital analyst Phil Hardie is taking a cautious stance with both market volatility and broad market sell-off weighing on stock performance thus far in 2022.

" Given market returns are the primary driver for AUM growth and, as a result, earnings and cash flow growth, the market outlook plays a key role in driving sentiment and valuation multiples across the asset management sector,” he said.

“Elevated macroeconomic uncertainty caused by the risk of a central bank policy mistake, supply chain disruptions, ongoing war in Ukraine and inflation, have driven fears of an upcoming recession. In this environment we remain on the sidelines for the asset managers, with the exception of Guardian, which we view as the least sensitive to AUM fluctuations and market outlook. That said, at current valuations, we believe the group offers an attractive risk-reward trade-off, with an expected average return of 35 per cent in our base forecast.”

In a note released Tuesday, Mr. Hardie said a quick market recovery could lead to “a surprise continuation of the decade-long bull market could yield a big upside for the sector.”

“The geopolitical tensions, inflation, risk of error from tightening of monetary policies, supply chain disruptions, and a new wave of COVID-19 have brought concerns over an upcoming recession and further volatility across both equity and fixed income markets,” he said. “Given the uncertain market outlook, we have conducted Bull versus Bear case scenarios across the asset management sector. Our Base case scenario assumes that market conditions normalize from Q1/22 and onwards, with asset managers’ AUM experiencing mid-single-digit annualized returns. Our Bull case scenario assumes that Russia’s war in Ukraine comes to an end, inflation is controlled, and COVID-19 enters the endemic phase globally. This results in a quick and broad market recovery and a continuation of the decade-long bull market. Our Bull scenario assumes that equity markets rally to roughly 10 per cent above their record high by end of 2022, representing a 25-per-cent upside from April 2022 levels.”

However, in response to lower-than-expected assets under management levels at the end of the quarter, Mr. Hardie cut his target for companies in his coverage universe:

* Guardian Capital Group Ltd. (GCG.A-T, “sector outperform”) to $50 from $52. Average: $50.

“We believe GCG.A’s current valuation discount is too steep to ignore, and that the stock can outperform its peers in both bull and bear scenarios given its limited sensitivity to AUM outlook,” he said. “GCG.A remains our top small-cap value play, and our scenario analysis further supports our conviction that the current valuation discount is too steep to ignore, with a potential of 68-per-cent return on a bull case and a limited 24-per-cent downside risk in the direst scenario.”

* AGF Management Ltd. (AGF.B-T, “sector perform”) to $8.50 from $10. Average: $9.

* CI Financial Corp. (CIX-T, “sector perform”) to $25 from $27. Average: $27.63.

* IGM Financial Corp. (IGM-T, “sector perform”) to $51 from $55. Average: $52.29.

Meanwhile, in his own earnings preview, Canaccord Genuity analyst Scott Chan lowered his target for CI Financial Corp. (CIX-T, “buy”) to $27.50 from $32, IGM Financial Inc. (IGM-T, “buy”) to $51 from $57 and Onex Corp. (ONEX-T, “buy”) to $110 from $118.

“While valuations are depressed, we do see good opportunities for share upside dependent on better market conditions,” he said.


Citing its “strong track record of strategic execution (e.g., diversify business mix, invest in tech/data, grow derivatives and drive cost control) and defensive attributes (e.g., more than 50-per-cent recurring revenue, diversified/countercyclical revenue drivers, strong balance sheet and solid FCF generation,” National Bank analyst Jaeme Gloyn said he maintains “a favourable view” of TMX Group Ltd.’s (X-T long-term growth outlook following better-than-expected first-quarter results.

After the bell on Monday, the Toronto Stock Exchange operator reported core earnings per share of $1.82, down 3 per cent year-over-year but above Mr. Gloyn’s $1.71 estimate and the Street’s forecast of $1.71. The results/ Excluding contributions from BOX Holdings Group LLC, which it obtained voting control over in the quarter, revenues of $254-million came in line with estimates ($254-million and $256-million, respectively).

“While TMX did not disclose pre-tax expenses tied to BOX, TMX reported operating expenses of $145-million that exceeded our forecast by $8-million (roughly in line with the delta between BOX revenue and net income, assuming a U.S. tax rate of 21 per cent),” said the analyst. “This suggests to us TMX expenses roughly matched our estimates. Adj. EBITDA margin was 59 per cent beating the street implied 57 per cent and NBF 54 per cent, largely on BOX. On an organic basis (ex. BOX, AST Canada and Tradesignal), TMX delivered operating leverage of negative 5 per cent in Q1-22 as organic revenues decreased 3 per cent year-over-year against operating expense growth of 2 per cent year-over-year. Unsurprising given a 15-per-cent year-over-year decline from record Equities and FI Trading revenues in Q1-21.”

“Our forecast revisions largely reflect BOX accounting change from equity-accounted to consolidated, as well as BOX’s strong Q1-22 results. Core EPS is now $6.96 (was $6.81) in 2022 and $7.54 (was $7.40) in 2023.”

Keeping a “sector perform” rating to reflect a lower total return to his target compared to other companies in his coverage universe, Mr. Gloyn raised his target to $141 from $139. The average is $149.57.

Elsewhere, RBC’s Geoffrey Kwan increased his target to $165 from $163, reiterating an “outperform” rating.

“Q1/22 adjusted EPS was solidly ahead of consensus and slightly ahead of our forecast. TMX Group is our second-best idea, reflecting positive fundamentals, potential catalysts (e.g., M&A), and strong defensive attributes, yet with a P/E multiple that is below average vs. recent years,” said Mr. Kwan.


Morguard North American Residential Real Estate Investment Trust’s (MRG.UN-T) valuation is “too compelling to ignore,” said Laurentian Bank Securities analyst Frederic Blondeau.

He raised his rating to “buy” from “hold” after its first-quarter results narrowly exceeded expectations.

“Generally speaking, as we indicated numerous times in previously published research notes, in a context where risks relating to inflation are significant, and stagflation is a credible and plausible scenario, we continue to believe that multi-family REITs are well positioned to outperform the rest of the real estate spectrum, both operationally and financially,” the analyst said. “Specifically in terms of MRG, although we think there is rather limited visibility on potentially meaningful catalysts, current valuation levels are simply too compelling to ignore. In parallel, the REIT owns a high quality portfolio which could perform relatively well in the current environment. We would also add that the exceptionally conservative balance sheet and payout ratio further add to the level of comfort.”

Mr. Blondeau bumped his target to $20 from $19.50. The average is $21.90.


H.C. Wainwright analyst Kevin Dede warned Voyager Digital Ltd. (VOYG-T) “carries all the speculative risk some see in cryptocurrency plus crypto-related volatility, compounded by the higher risk exposure in small cap companies, such as: dilutive capital raises, short operating history, severe competition, and regulatory changes.”

In a research note released Tuesday, he lowered his financial forecast for the New York-based crypto broker in response to its April 7 announcement that it expects revenue for its “extremely challenging” third quarter, which ended March 31, of between US$100-million to US$105-million, down from US$164.8-million in the previous quarter.

“Some weeks following with our $145-million sales estimate unchanged, the disparity created concern within the echelons of Voyager’s management such that our position was called out — on our check [Monday] night, we found that FactSet showed our sales estimate misrepresented at $180-million .... We are ‘falling in-line’ with espoused projections in chopping our revenue estimate to $100-million to help ensure the print, in two weeks’ time, should not appear as a miss,” he said. “Our perspective, as presented in financial form, offers little alternative value-add save to bolster consensus. Meanwhile, we see little danger of a miss regardless of where we sat, primarily given the greatest Voyager revenue variable is trading activity, and it would seem highly unlikely lower platform volumes are either misinterpreted by either the company’s management or broad investor thinking as encompassed by the current mid-$4.50 trading range.”

Mr. Dede said the declines to his estimates shouldn’t surprise investors monitoring the crypto sector, pointing to “flattish” bitcoin and alt-coin prices through the quarter.

“It appears, extrapolating these current trends, the June quarter may fall out similarly, and we have reined in projections there as well, making requisite adjustments to discretionary marketing spend in anticipation of Voyager’s behavior as not to post astounding cash burn,” he said. “Meanwhile, the grander issue we see is progress against the company’s other stated objectives: (1) acquiring a NY BitLicense; (2) opening trading in France and/or Denmark; (3) expanding into Canada; and (4) the grand dissemination of the Voyager debit card.

“The delays experienced on these objectives may well be held against a management team that is otherwise widely recognized as elite—perhaps the stock’s mid-C$4.50 trading range is a reflection of a combination of a souring perspective on crypto and a realization that Voyager has a ton on its plate, much of which publicly stands as unexecuted.’

Maintaining a “buy” rating he cut his target to $16 from $28. The average is currently $18.76.

“Despite the negatives, we see the shares’ current position as trough that should not be surprising within the volatile crypto-sphere while presenting an opportune moment in which to reset our price target,” Mr. Dede said.


Pointing to macro headwinds and “the severe downturn in [tech] valuations with the selloff in the public markets this year,” Canaccord Genuity analyst Aravinda Galappatthige lowered his recommendation for Emerge Commerce Ltd. (ECOM-X) to “hold” from “buy” previously.

On Monday, the Toronto-based acquirer and operator of niche e-commerce brands reported its final results for its fourth quarter of 2021. Revenue and adjusted EBITDA ($14.9-million and $1.4-million, respectively) both increased from the same period a year ago ($2.4-million and $0.1-million).

“Given that the bulk of the current business composition was acquired during 2021, it is quite difficult to assess organic movement,” Mr. Galappatthige said. “With that said, management’s presentation noted a recovery in the Golf experiences space, which had been depressed for several quarters. Furthermore, it also appears that truLOCAL did achieve some growth in 2021, despite headwinds in H2 owing to rising inflation. Recall management previously disclosed that pricing has been adjusted accordingly to help maintain margins. Looking ahead, ECOM still believes that low double-digit top-line growth can be achieved in 2022 at truLOCAL. With respect to the most recent acquisitions – BattlBox and WSP – it’s somewhat early to assess the outlook, although we can have some confidence that WSP is likely better equipped to navigate macro headwinds given its niche positioning as well as an extensive history of stability.”

The analyst thinks the coming quarters will be closely scrutinized given the potential impact of inflationary pressures and supply chain challenges, which he thinks could represent downside risks to many of its businesses.

“In addition, privacy initiatives on the digital advertising front have impacted the ability of businesses to achieve effective targeting of audiences, in turn affecting customer acquisition.” he added. “We have made additional downward revisions to our estimates to reflect this backdrop.”

Mr. Galappatthige cut his target for Emerge shares to 50 cents from $1.20. The current average is $1.73.

“We also recognize that a strong currency is a key component of ECOM’s consolidation thesis, which is very much challenged in the present environment and considering its existing balance sheet. We are thus downgrading the stock from a Buy to a HOLD, with a view to revisiting our position based on execution during the H1/22 period,” he said.

Elsewhere, Raymond James’ Steven Li cut his target to $1 from $2.25 with an “outperform” rating.

“4Q21 was at the high-end of its pre-announced range with encouraging FCF generation (up about $2.0-million),” he said. “Management 2022 priorities remain to elevate EMERGE from being marginally profitable to be meaningfully profitable with solid positive CFO as well as drive organic growth from key segments: BattlBox (new product launches), truLOCAL (new initiatives e.g., B2B) and WSP (sustained recent momentum). We have lowered our target multiple/target price with ecommerce peers valuation down substantially in the last 3 months.”


In other analyst actions:

* Seeing its “soft” first quarter already baked into its share price National Bank’s Michael Parkin trimmed his target for shares of Eldorado Gold Corp. (ELD-T) to $19 from $20, remaining above the $18.31 average, with an “outperform” rating.

“We are expecting operational improvements quarter-over-quarter in 2022 and therefore maintain our Outperform rating on Eldorado,” he said.

* Raymond James’ Michael Shaw increased his target for shares of Gibson Energy Inc. (GEI-T) to $27 from $26.50, exceeding the $25.50 average, with an “outperform” rating.

* TD Securities’ Menno Hulshof raised his MEG Energy Corp. (MEG-T) target to $23 from $21 with a “hold” rating, while BMO’s Randy Ollenberger raised his target to $25 from $22 with an “outperform” rating. The average is $24.

“MEG reported stronger-than-expected cash flow on higher production and lower royalties, generated record quarterly free cash flow of $499 million, and updated its capital allocation strategy. We believe that MEG offers investors significant leverage to heavy crude oil prices as well as a potential equity re-rating as the company reduces its financial leverage and initiates its share buyback program,” said Mr. Ollenberger.

* Jefferies’ Laurence Alexander raised his Methanex Corp. (MEOH-Q, MX-T) target to US$67 from US$56. The average is US$57.83 with a “buy” rating. The average is US$57.83.

* CIBC’s Anita Soni reduced her New Gold Inc. (NGD-N, NGD-T) target to US$1.90, below the US$2.02 average, from US$2.10 with a “neutral” rating, while TD Securities’ Steven Green cut his target to US$1.75 from US$2 with a “hold” rating.

* RBC’s Irene Nattel bumped up her Park Lawn Corp. (PLC-T) target by $1 to $54 with an “outperform” rating. The average is $46.64.

* Stifel’s Cole Pereira raised his target for Pason Systems Inc. (PSI-T) to $21 from $20 with a “buy” rating. The average is $19.08.

“Pason’s forward EBITDAS and returns profile is tracking well ahead of prior cycles despite North American activity expected to remain lower than prior peaks. Accordingly, we expect the stock to continue to re-rate from its current valuation,” he said.

* Desjardins Securities’ Doug Young lowered his Power Corporation of Canada (POW-T) target to $47 from $49, keeping a “buy” rating. The average is $46.19.

* Wedbush’s Ygal Arounian cut his Shopify Inc. (SHOP-N, SHOP-T) target to US$630 from US$937 with an “outperform” rating. The average is US$883.06.

* Stephens’ Jack Atkins cut his TFI International Inc. (TFII-N, TFII-T) target to US$130 from US$140 with an “overweight” rating. The average is US$114.59.

* CIBC’s Hamir Patel hiked his target for West Fraser Timber Co. Ltd. (WFG-T) to $146 from $126, maintaining an “outperformer” rating. The average is $152.95.

Report an error

Editorial code of conduct

Tickers mentioned in this story