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

While Shopify Inc. (SHOP-N, SHOP-T) enjoyed “some new partnership momentum” during the second quarter, Citi analyst Tyler Radke warned its financial results are likely to be hurt by “a continuation of e-commerce normalization and fresh new economic headwinds.”

“The setup for SHOP into Q2 remains challenging given more prominent macro headwinds in the second quarter and back half of the year,” he said in a note released Tuesday. “Checks and data points suggest continued weakening consumer demand. This ranges from slower web traffic to deteriorating spending seen from our proprietary credit card data in apparel/electronics category where SHOP has considerable exposure. We note that job postings have declined materially from recent highs (off 80 per cent) which may signal lower management confidence, but also more of a focus on balanced profitability. We still expect management to talk to 2022 as an investing year particularly with Deliverr closing and a much lower margin profile.”

The analyst acknowledged the Ottawa-based firm’s new partnership with YouTube “generated some buzz” and will allow merchants to advertise, sell and tap into YouTube’s “vast” subscriber’s base. However, he does not expect that “social selling” to have a “meaningful” impact in the near-term.

Shopify to cut 10 per cent of staff as ecommerce slows

Analysts slash estimates for Shopify amid global retreat for tech stocks

Prior to Tuesday’s premarket announcement of a significant reduction in its workforce, Mr. Radke moderated his estimates for Shopify “meaningfully” to reflect the difficult consumer and macro backdrop. He’s now estimating a three-year revenue compound annual growth rate of 27 per cent, down from 32 per cent previously.

For the second quarter, he’s now projecting revenue of US$1.304-billion, down from US$1.394-billion and below the Street’s forecast of US$1.328-billion. His earnings per share estimate fell to a loss of 1 cent, falling from an 8-cent gain and below the consensus of a 2-cent profit.

“We are cutting our estimates below the street and expect that headline numbers could come in a touch below consensus with a more cautious outlook,” he said.

“Our remaining FY22 estimates are cut by 6-7 pts (with new merchant additions now down 7 per cent year-over-year) bringing our estimates slightly below consensus. Our estimates already baked in Deliverr, which adds 4 pt of growth in the back half of the year. We are now expecting FY22 operating margin to be slightly below breakeven following commentary of reinvesting all of gross profit back into opex this year + the extra headcounts from Deliverr.”

With those changes, Mr. Radke lowered his target for Shopify shares to US$37 from US$43.20. The average on the Street is now US$54.19.

“We maintain our Neutral/High Risk rating as we still see downside risk to estimates and see SHOP as having a more discretionary / cyclical demand profile relative to peers. Given the lack of valuation support, particularly with margins likely to be breakeven or worse this year, we worry shares could remain range bound, despite some favorable new product/partnership announcements throughout Q2,” he said.


Desjardins Securities analyst Chris MacCulloch thinks recent market volatility has “provided a compelling opportunity for investors to pick up exposure to the Canadian E&P sector, which continues to benefit from windfall commodity prices.”

In a research report released Tuesday, he made minor tweaks to his commodity price forecasts, including trimming his WTI price assumptions for the second half of 2022 and 2023 to US$100 per barrel and US$90 per barrel, respectively, from US$102.85 and US$100 based on a “more cautious” near-term outlook.

“While we believe that recessionary fears are warranted given the abrupt shift in monetary policy, from our perspective, most equities are already pricing in an economic downturn following the recent market correction,” said Mr. MacCulloch. “Meanwhile, we continue to see robust FCF yields across the sector, providing further support to balance sheet deleveraging and capital returns. Despite our generally upbeat tone, we have started normalizing our rating system to reflect diminishing returns to target following an extended period of sector outperformance when we were carrying Buy ratings across the Canadian E&P landscape.”

With that view, he downgraded a pair of stocks:

* Imperial Oil Ltd. (IMO-T) to “hold” from “buy” with a $70 target, down from $76. The average on the Street is $71.41.

“The downgrade is primarily a function of relative valuation within the context of our more cautious outlook for oil prices given the 28-per-cent potential total return vs our revised $70.00 target, which implies a 2023 EV/DACF multiple of 5.3 times,” he said. “Meanwhile, crack spreads have also narrowed considerably in recent weeks, by upwards of 50 per cent based on some benchmarks. Following a challenging 1Q22 report, we expect the company to bounce back in 2Q22 as mining operations normalize, with an added boost from record-high cracks. Admittedly, it is tough to poke holes in IMO’s operations or management, which remain among the best in class in the Canadian energy sector, from our perspective. The company’s recently announced sale of its XTO Energy Canada assets should also help bolster its renewed NCIB program following the completion of its $2.5-billion SIB in late June.

“Within our coverage universe, IMO has historically commanded a premium multiple, which we believe is still warranted. But as the macro tailwinds behind oil prices have started to abate, we see less running room for the stock relative to where its integrated peers are currently trading.”

* MEG Energy Corp. (MEG-T) to “hold” from “buy” with a $21 target, down from $23. The average is $25.19.

“Rising oil prices have been a huge boost for MEG, which has been rewarded by a 40-per-cent increase in the stock price to date this year, outperforming most of its oilweighted peers,” he said. “However, we believe that further upside in oil prices will be capped by recessionary fears and early signs of demand destruction as the impact of tightening monetary policy begins taking hold. Additionally, our continued bullishness on natural gas fundamentals presents another headwind for MEG, albeit relatively modest, given its pure-play oil sands structure. As a reminder, the company’s production base is 100-per-cent oil-weighted and rising natural gas prices are an input cost for its SAGD operation.”

For large-cap stocks in his coverage universe, Mr. MacCulloch’s target price adjustments were:

  • Canadian Natural Resources Ltd. (CNQ-T, “buy”) to $95 from $100. Average: $90.76.
  • Cenovus Energy Inc. (CVE-T, “buy”) to $31 from $32. Average: $31.56.
  • Suncor Energy Inc. (SU-T, “buy”) to $57 from $60. Average: $55.79.
  • Tourmaline Oil Corp. (TOU-T, “buy”) to $91 from $80. Average: $90.73.

“We expect another exhilarating quarter jam-packed with cash flow beats and increased returns to shareholders as industry benefited from what may have been, in hindsight, the top of the commodity price cycle, at least on the oil side, particularly for the integrated producers capturing record crack spreads,” he said. “Inflationary pressures will be another major theme, with several producers likely to announce increased capital spending programs. We have attempted to account for both trends by modelling enhanced shareholder returns for those producers that have provided explicit guidance while also ramping capex assumptions. All that said, we see ATH, AAV and HWX offering the largest upside potential between our 2Q22 CFPS estimates and consensus expectations.”


Calling it a “well-known eye health company at an inflection point,” RBC Dominion Securities analyst Douglas Miehm initiated coverage of Bausch-Lomb Corp. (BLCO-N, BLCO-T) with an “outperform” rating despite warning of near-term volatility.

Bausch + Lomb was spun out by Bausch Health Companies Inc. (BHC-N, BHC-T) and began trading on both sides of the order on May 6 following an initial public offering. Last week, the parent company postponed IPO plans for its Solta Medical skin-care unit, citing challenging market conditions.

Mr. Miehem called Bausch + Lomb a “solid, pure-play ophthalmology firm with robust brand equity.”

“B+L is a well-established eye health company that operates in the $50-billion Vision Care, Surgical and Pharmaceutical markets, supplying a very broad portfolio of ophthalmology products and services,” he said. “Given its wide product offering and more than 150-year operating history, it is not surprising that the company enjoys strong brand recognition globally. Having said this, there remains a few notable gaps in its product suite that should be resolved over 24 months which should permit B+L to better leverage its high brand equity and achieve and perhaps exceed its targeted 4-5-per-cent revenue growth over time.”

“After a period of under-investment, B+L invested more than $2-billion in the business between PPE (increase manufacturing capacity) and R&D, and is now positioned to take incremental share in the daily SiHy contact lens market and launch new devices/ophthalmic drugs into this market with only four large competitors. This investment is expected to translate into enhanced EBITDA margins over the next several years (RBC estimates 19.6 per cent in 2022 to 22.0 per cent in 2025) following a trough in 2022. We expect this margin growth to help re-rate the shares higher, marking an expected inflection point.”

Mr. Miehm emphasized his bullish view is based on a 12-month outlook, and said shares “may be volatile in the near-term based on the outcome of the BHC Xifaxan patent trial (decision likely by mid-August), which will potentially influence the timing/decision regarding the expected 80-per-cent BLCO distribution by BHC.”

Calling its valuation “attractive” and seeing an enticing risk-reward proposition for investors, he set a target of US$22. The average on the Street is US$23.56.

“Our work indicates the market is potentially discounting a 55-70-per-cent chance of a BHC Xifaxan patent loss (75-100 per cent for BLCO) vs two independent patent expert groups that collectively point to 50/50 odds,” he said.

“While B +L offers a compelling pure-play eye health story, we expect the company to trade at a discount to peers until both near-term market (small float/ BHC Xifaxan patent outcome) and longer-term operational factors are addressed. However, at 10 times 2023 estimated EV/EBITDA we believe these factors are adequately reflected and our target price, at 12.5 times, reflects a material discount to comps at 16-times consensus estimates. As such, we find the current valuation attractive and continue to prefer BLCO to BHC as a preferred way to capture the apparent asymmetric risk profile embedded in the patent outcome.”

Concurrently, Mr. Miehm cut his second-quarter forecast for Bausch Health Companies Inc. (BHC-N, BHC-T), leading him to reduce his target for its shares to US$12 from US$17, below the US$22.86 average, with an “outperform” rating.

“Within the next three weeks, we are likely to learn the outcome of the Xifaxan patent decision, and it will have important implications for both BHC and BLCO,” he said. “Our work, which can act as patent outcome playbook, indicates that the market appears to be adopting a more jaundiced view of the decision (discounting a 55-70-per-cent chance of a loss for BHC & 75-100 per cent for BLCO) versus patent experts, which are closer to an average 50/50 outcome. For many investors it may be best to avoid this binary situation but for those interested, we continue to believe BLCO may be a better way to capture the apparent asymmetric risk-profile embedded in the outcome, as upside returns could be above 60 per cent vs 15-per-cent downside, in our view.”


National Bank Financial analyst Vishal Shreedhar is “expecting continued momentum” when Pet Valu Holdings Ltd. (PET-T) reports its second-quarter financial results before the bell on Aug. 9, seeing the Markham, Ont.-based company benefitting from market expansion.

“Management suggested that approximately 3 million pets were adopted during the pandemic (annual spend of $1,000 per dog and $700-$800 per cat),” he said. “According to Statistics Canada, the total pet market (excluding veterinary and other services) increased by $1.339-billion from 2019 to 2021, or about 23 per cent. For reference, over that same time period, PET’s system-wide sales grew by 35 per cent.”

For the quarter, Mr. Shreedhar is projecting revenue of $215-million, exceeding the Street’s forecast of $211-million and up from $182-million a year ago. His earnings per share estimate is 33 cents, a penny above the consensus and up 21 cents year-over-year.

The analyst also sees the possibility for further increases to the company’s full-year guidance after a raise following the release of first-quarter results.

“It expects revenue between $870-million and $895-million (NBF estimate is $896-million; consensus is $889-million), supported by same-store sales growth of 9 per cent to 12 per cent (NBF is 11.8 per cent), 35 to 45 new stores openings (NBF reflects 42) and EBITDA between $191-million and $198-million (NBF is $201-million; cons. is $197-million,” he said. “EPS is expected to be between $1.37 and $1.44 (NBF is $1.46; cons. is $1.44). Last quarter, management indicated it was seeing continued momentum into Q2. We wouldn’t be surprised if PET upwardly revises guidance when it provides an update given continued momentum and a history of conservative outlook commentary.”

After raising his full-year revenue and earnings expectations for both 2022 and 2023, Mr. Shreedhar bumped up his target for Pet Valu shares by $1 to $39. The average on the Street is $41.14.

“We value Pet Valu at 14.0 times our 2023/24 EBITDA. While we have a favourable view of PET’s business model, its outlook, and the industry, these positive attributes are adequately reflected in valuation,” he said.


RBC Dominion Securities analyst Drew McReynolds sees “few places to hide” as “growing” macro concerns weigh on the Canadian media industry heading into second-quarter earnings season.

“Year-to-date, total returns for all of the companies in our media coverage are negative with only Thomson Reuters outperforming the negative 9-per-cent total return for the TSX Composite,” he said. “We attribute the pullback to macro concerns looking into H2/22 and 2023 including implications for the advertising market.”

“Until greater visibility emerges as to whether a soft or hard landing scenario transpires, we expect the group to remain under pressure.”

With RBC’s Economics team seeing Canada entering a “mild” recession by the middle of 2023, Mr. McReynolds said it’s difficult to invest in the media industry given cyclical revenue exposure.

“We do see some interesting opportunities where either we expect earnings to prove more resilient versus what is currently being priced into the stock, or where we believe the stock has over-shot to the downside under most economic scenarios and therefore looks mispriced,” he said. “We expect Thomson Reuters earnings to be the most resilient this cycle across our broader telecom and media coverage. Furthermore, we expect the company’s earnings to prove even more resilient versus prior cycles (2020, 2008-2009, 2001) reflecting a more defensive asset mix given the sale of Financial & Risk, unique structural tailwinds (i.e., hybrid workplace post-COVID-19), the ongoing Change Program and improved execution. We believe VerticalScope, while not immune to a slowdown in digital advertising, at 5.7 times FTM [forward 12-month] EV/EBITDA is largely factoring in these headwinds particularly given: (i) one of the most profitable and proven business models in our coverage (a business model that we believe warrants a 15-times multiple in a normal operating environment); and (ii) company-specific factors that should help mitigate macro headwinds, including strategic initiatives in e-commerce, continued optimization of digital advertising with FORA and additional accretive tuck-in M&A. Lastly, we see the pullback in Boat Rocker at 3.6 times FTM EV/EBITDA as overdone particularly given independent content company peers that trade at an average of 7.8 times and what should be relatively resilient content and distribution revenues.”

Mr. McReynolds adjusted his target for those three picks. His changes were:

* Thomson Reuters Corp. (TRI-N, TRI-T) to US$122 from US$123 with an “outperform” rating. The average is US$117.37.

“We continue to view Thomson Reuters as a high-quality core holding with both growth and defensive attributes,” he said. “We believe the company has an ability to deliver average annual total returns of approximately 10–15 per cent over the longer term and has entered a new phase of 8–12-per-cent annual dividend growth underpinned by a step-up in FCF generation driven by the ongoing Change Program. We believe the company remains on track to meet its upwardly revised financial outlook for 2022 and 2023 despite rising macro uncertainty. Relative to prior cycles (2020, 2008-2009, 2001), we expect the company’s earnings to prove even more resilient reflecting a more defensive asset mix given the sale of Financial & Risk, unique structural tailwinds (i.e., hybrid workplace post-COVID-19), the ongoing Change Program and improved execution. Valuation-wise, while at a current FTM EV/EBITDA multiple of 18.5 times we continue to see some valuation risk should there be another major leg down in the broader market (versus a historical trading range of 8-24 times and what we believe should be a cyclical trough this cycle of 14-15 times), we do view current valuation as still reasonable given the positive fundamental set-up that should unfold almost under all economic scenarios.”

* VerticalScope Holdings Inc. (FORA-T) to $32 from $27 with an “outperform” rating. Average: $27.89.

“With 71 per cent of revenues driven by digital advertising, VerticalScope earnings are not immune to an economic slowdown and what appears to be a pending slow down in the digital advertising market in H2/22,” he said. “Furthermore, supply-chain disruption and ad tech evolution continue to negatively impact major advertising categories as well as investor sentiment. However, we believe the stock at 5.7 times FTM EV/EBITDA is largely factoring in these headwinds, particularly given: (i) one of the most profitable and proven business models in our coverage that includes mid-to-high single digit normalized organic revenue growth, 45-per-cent-plus EBITDA margins and 70-per-cent-plus EBITDA-to-FCF conversion (a business model that we believe warrants a 15 times multiple in a normal operating environment); and (ii) company-specific factors that should help mitigate macro headwinds, including strategic initiatives in e-commerce, continued optimization of digital advertising with FORA and additional accretive tuck-in M&A. "

* Boat Rocker Media Inc. (BRMI-T) to $9 from $7 with an “outperform” rating. Average: $8.38.

“Within our traditional coverage (broadcasting, publishing, advertising, printing and content production), we believe the earnings of content production and distribution companies should prove the most resilient reflecting what continues to be a robust streaming-driven content cycle,” he said. “Against this backdrop, we believe Boat Rocker at 3.6 times FTM EV/EBITDA is oversold, particularly given: (i) independent content company peers that trade at an average of 7.8 times; (ii) 2022 guidance that implies double-digit adjusted EBITDA growth with a strong premium TV pipeline, high-margin assets (Kids and Family, Representation) and net debt-free balance sheet; (iii) a diversified revenue mix by genre, channel and geography enabling the company to seamlessly pivot where needed; and (iv) a strong management team that is commercially and FCF minded.”

Mr. McReynolds’s other changes were:

* Enthusiast Gaming Holdings Inc. (EGLX-T, “outperform”) to $6 from $8. Average: $7.40.

* Stingray Group Inc. (RAY.A-T, “outperform”) to $9 from $8. Average: $8.

* WildBrain Ltd. (WILD-T, “sector perform”) to $4 from $3.50. Average: $4.29.


Seeing a “challening environment weighing on asset and management stocks,” Scotia Capital analyst Phil Hardie cut his forecast and target prices for the sector ahead of second-quarter earnings season.

“The operating environment across the asset & wealth management sector has become increasingly challenging as 2022 progresses,” he said. “Equity and fixed income markets sold off through the second quarter and volatility appears to be on the rise. A difficult market backdrop and an uncertain macroeconomic outlook have likely eroded retail investor confidence and negatively impacted industry retail flows. June’s mutual fund sales saw their highest level of net redemptions since the record set in March 2020, and monthly ETF flows experienced the first month of redemptions since 2016.

“The market outlook plays a key role in driving sentiment and valuation multiples across the asset management sector, given that market appreciation/depreciation are the primary drivers for AUM growth and, as a result, earnings and cash flow growth. Elevated macroeconomic uncertainty caused by the risk of a central bank policy mistake, supply chain disruptions, the 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.”

Mr. Hardie’s changes were:

  • AGF Management Ltd. (AGF.B-T, “sector perform”) to $7 from $8. Average: $7.57.
  • CI Financial Corp. (CIX-T, “sector perform”) to $18 from $21. Average; $20.56.
  • Fiera Capital Corp. (FSZ-T, “sector perform”) to $9.50 from $10.50.
  • Guardian Capital Group Ltd. (GCG.A-T, “sector outperform”) to $43 from $45. Average: $41.67.
  • IGM Financial Inc. (IGM-T, “sector perform”) to $42 from $47. Average: $45.29.

“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. 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 45-per-cent return on our 12-month target price and a limited 16-per-cent downside risk to our bear case scenario,” said Mr. Hardie.


In other analyst actions:

* Following the release of its audited fiscal 2021 results after the bell on Monday, IA Capital Markets analyst Chelsea Stellick downgraded LexaGene Holdings Inc. (LXG-X) to “speculative buy” from “buy” with a 50-cent target, down from 75 cents.

“Although audited financial results were delayed due to a misunderstanding of eligibility for ‘foreign private issuer’ status, LXG quickly secured a management cease trade order and remedied the filing requirement,” she said. “Although LXG doubled unit sales in F2022, the Company is not moving as quickly as we expected to penetrate the veterinary and CDMO markets and we have adjusted our forecasts accordingly. We revise our target price to $0.50/share (previously $0.75/share) based on the new forecast using the average of P/B, EV/EBITDA, and DCF valuation models. Although our belief in the strength of the underlying technology and the large unmet need is unchanged, we revise our recommendation to a Speculative Buy (previously Buy) until LexaGene can build out a larger install base, which will solidify its place and unlock the large upside available as a disruptor in the diagnostics market.”

* Following Monday’s announcement of the acquisition of Maslack Supply Ltd., Canaccord Genuity’s Luke Hannan raised his Uni-Select Inc. (UNS-T) target to $41 from $39 with a “buy” rating, while Desjardins Securities’ Benoit Poirier moved his target to $39 from $37 also with a “buy” rating. The average is $37.07.

“In our view, the acquisition provides a glimpse into how UNS’ management team can drive shareholder value through M&A,” said Mr. Hannan. “While the transaction is relatively small (Maslack adds 3 per cent to our 2023 EBITDA estimate), it is nonetheless accretive to UNS and, more importantly, provides a platform for UNS to deploy its purchasing power to unlock synergies that otherwise would be unavailable to a smaller player like Maslack.”

“With ample opportunity to roll up a fragmented market across each of Canada, the U.S., and the UK, and a balance sheet that accommodates such a strategy, we expect UNS to continue creating value for shareholders through similar acquisitions moving forward.”

* RBC’s Sabahat Khan assumed coverage of Boyd Group Services Inc. (BYD-T) with an “outperform” rating and $195 target. The average is $182.23.

“We believe the recent pullback in valuation provides an attractive entry point given our view that margins will trend toward historical levels, driven by a combination of pricing and a directional improvement in supply chain-related headwinds,” he said.

* Mr. Khan also assumed coverage of Uni-Select Inc. (UNS-T) with a “sector perform” rating and $37 target. The averages is $37.07.

“The current management team has made significant progress in a short period of time since joining the company in H1 2021 and have positioned Uni-Select for continued growth (future growth is likely to reflect organic initiatives as well as M&A). The recent progress and favourable outlook, however, are fairly reflected in the current valuation,” he said.

* Raymond James’ Rahul Sarugaser initiated coverage of Medexus Pharmaceuticals Inc. (MDP-T) with an “outperform” rating and $4.50 target. The current average on the Street is $6.50.

“With its solid platform of growth-stage (e.g. IXINITY, Rupall) and mature assets (e.g. Rasuvo/Metoject), that effectively cover the operations of the company, we calculate that 60 per cent of the revenue from MDP’s newest assets — Treosulfan and Gleolan — should drop straight to the bottom line, driving a material escalation in EBITDA beginning in 2H23, and into 2024,” he said.

* CIBC World Markets’ Krista Friesen lowered her target for shares of Autocanada Inc. (ACQ-T) to $35 from $39 with an “outperformer” rating, while Canaccord Genuity’s Luke Hannan cut his target to $45 from $55 with a “buy” rating. The average is $49.35.

“Overall we’d call the preliminary results generally in line, although the risk of future inventory writedowns is somewhat elevated. As a result, we are modestly lowering our target multiple to 7.5 times (from 8.1 times) and applying it to our 2023 estimates, which assume a more normalized front-end margin environment, resulting in our new target price,” said Mr. Hannan.

* Following “significantly weaker than anticipated” second-quarter results, Scotia Capital’s Orest Wowkodaw trimmed his Copper Mountain Mining Corp. (CMMC-T) target to $2.50 from $3, below the $3.58 average, with a “sector outperform” rating, while BMO’s Rene Cartier cut his target to $3.25 from $3.75 with an “outperform” rating.

* CIBC’s Paul Holden raised his Element Fleet Management Corp. (EFN-T) target to $15.50 from $14 with an “outperformer” rating. The average is $16.

“EFN has easily been one of the best performing stocks in our coverage universe year-to-date (up 10.3 per cent). We think the stock can continue to outperform based on improving production for North American OEMs, inflation being a benefit to operating income, and less earnings sensitivity to a slowing economy,” he said.

* JP Morgan’s Richard Sunderland lowered his Emera Inc. (EMA-T) target to $59 from $63, below the $65.02 average, with an “underweight” recommendation.

* Credit Suisse’s Andrew Kuske raised his target for shares of Vancouver-based Mercer International Inc. (MERC-Q) to US$21 from US$19 with an “outperform” rating. Other analysts increasing their targets include: CIBC’s Hamir Patel to US$19 from US$17 with an “outperformer” rating, Raymond James’ Daryl Swetlishoff to US$24 from US$17 with an “outperform” rating and TD Securities’ Sean Steuart to US$16.50 from US$15 with a “hold” rating. The average target on the Street is US$19.10.

* RBC’s Irene Nattel lowered her Neighbourly Pharmacy Inc. (NBLY-T) target to $38 from $42 with an “outperform” rating. The average is $32.56.

“We reiterate our constructive long-term view on NBLY, with current valuation an attractive opportunity to establish/expand a position in one of the most defensive, high growth names in the CDN consumer sector. NBLY has i) a unique position as consolidator of choice in, ii) a defensive industry that iii) benefits from secular growth trends in the form of favourable demographics and the ongoing expansion of pharmacy services. Trimming target to $38 on impact of rising long-term rate environment on valuation; risk/ reward appears squarely to the upside for LT investors,” she said.

* BMO Nesbitt Burns’ Peter Sklar lowered his target for shares of Restaurant Brands International Inc. (QSR-N, QSR-T) to US$57 from US$61, below the US$61.13 average, with a “market perform” rating.

“Mobility data suggests flat/declining year-over-year U.S. traffic at RBI, but menu price increases could have offset decelerating traffic,” he said. “As well, app activity at Tim Hortons Canada is up 15 per cent quarter-over-quarter, and 30 per cent of sales are through digital channels. As a result, there could be upside sales comp surprises. BMO’s U.S. BK and Popeyes Q2/22 comp estimates (both 0 per cent) are currently the high estimates. We believe the unpredictability of costs could be driving the wide consensus EPS range of $0.68-0.79 (BMO: $0.72). We forecast Q2/22 costs have not diminished vs. Q1/22.”

* Scotia Capital’s Michael Doumet lowered his Stelco Holdings Inc. (STLC-T) target to $45 from $57 with a “sector perform” rating. The average is $50.52.

“HRC prices have declined 40 per cent since the April peak,” he said. “The potential for additional pressure on realized prices (versus CRU) due to shortening lead times and upwards pressure on costs could weigh on 2H22 EBITDA. While the language in the press release suggests 2H consensus estimates are too high (we trimmed our forecasts), we believe the commentary largely reflects prevailing market/pricing conditions (i.e. our/Street estimates were somewhat stale following the recent decline in HRC). Nonetheless, as a result of our lowered estimates (and reduced mid-cycle valuation), we lowered our one-year target price to $45/share. In the N-T, we believe capital deployment remains a supportive catalyst.”

* Credit Suisse’s Curt Woodworth cut his Teck Resources Ltd. (TECK.B-T) target to $63 from $68, keeping an “outperform” rating. The average is $56.19.

“While the recent pricing headwinds (esp. met coal decline) has weighed on the stock performance (down approximately 40 per cent from its June peak), we continue to view Teck as the best mining pick in our coverage,” he said. “We believe the stock is underappreciate by the market despite having compelling FCF profile and the best growth potential in copper. Looking ahead, we see further upside to capital returns driven by strong FCF generation from coal assets even at lower prices and decline in capex post QB2 completion (on-track for 4Q’22).”

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