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

National Bank Financial analyst Maxim Sytchev is “not loving” Ritchie Bros. Auctioneers Inc.’s (RBA-N, RBA-T) US$7.3-billion acquisition of IAA Inc. (IAA-N), calling it “a large deal in an uncertain environment.”

However, he raised his recommendation for the Vancouver-based company to “sector perform” from “underperform” in response to the harsh reaction it received from investors, leading to a 17.7-per-cent drop in share price in Monday trading.

“Investors view RBA as counter-cyclical; hence, why shares were up 9 per cent year-to-date BEFORE the deal (yes, performance has been generally better than expected but thematic, in our view, is more important … Toromont has been beating earnings materially year-to-date but shares are down 9 per cent,” said Mr. Sytchev. “IAA, no argument, is a solid business. Yet, shares are down 22 per cent year-to-date on volume/cycle/age of fleet concerns (same for Copart). The co-mingling of different thematic drivers can be viewed as diversification, but we have often seen that investors prefer direct plays.”

“While we understand why management is deploying its underlevered balance sheet, we do wonder how the different drivers for ownership will impact the pro-forma company’s valuation. While we do not like the deal as it muddies the picture, even with a compressed forward multiple, the potential downside has been captured in [Monday’s] share price reaction, leading us to remove our Underperform rating.”

The analyst thinks approval by shareholders for the deal is not guaranteed, “especially in light of [Monday’s] market reaction.”

“On the positive side of the ledger, one might say that as the cycle improves for both used equipment/vehicles (both markets are now impacted by lack of new supply), we could really benefit from the cycle uptick,” said Mr. Sytchev. “We are more bullish on the construction market given North American infra plans but autos are now facing a tough backdrop. Record-high used car prices significantly benefited IAA’s buyer fee revenues over the last two years and with the cycle now reversing quickly (for example, the Manheim Used Vehicle Value Index is now down 10.6 per cent year-over-year), we believe this will be a material top-line headwind going forward.”

Concurrent with the deal, Richie Bros. released third-quarter results which Mr. Sytchev called a “strong showing.” That included gross transaction volume of US$1.358-billion, up 6.9 per cent year-over-year and in line with the analyst’s expectation, and earnings per share of 53 US cents, topping both his 41-US-cent estimate and the 37-US-cent consensus on the Street.

His takeaways from the conference call with management were: “1) IAA is by far RBA’s largest acquisition and much is needed to assuage fit concerns; 2) Early signs of heavy equipment volume recovery; 3) Management is confident in revenue synergies prospects; we are in ‘wait-and-see mode; 4) Leverage profile shifts materially.”

He trimmed his target for Richie Bros shares to US$55 from US$60. The average target on the Street is US$64.17.

Elsewhere, BoA Securities’ Michael Feniger cut Ritchie Bros to “neutral” rom “buy” with a target of US$55, down from US$74.

Others making changes include:

* Raymond James’ Bryan Fast to US$55 from US$62 with a “market perform” rating.

“[Monday’s] transformational acquisition of IAA caught many by surprise (including ourselves) as Ritchie expanded into the salvage auto auction industry,” said Mr. Fast. “We agree that the acquisition of IAA immediately diversifies and scales the business, but we’re left wondering just how complimentary the two businesses could be. With the stock ending down 18 per cent on the day (vs. the S&P500 up 1 per cent), the year-to-date gains that investors enjoyed in Ritchie were more than wiped out. We expect that investors who acquired Ritchie as a countercyclical ‘safe’ haven (in what has been a brutal market) were caught off guard by the transaction, which only added to the selling pressure. While the acquisition metrics are reasonable and the synergy targets appear achievable, we expect investors will need convincing in order to push the deal across the finish line, as [Monday’s] reaction was an indication of where investors sit.”

* Scotia Capital’s Michael Doumet to US$59 from US$64 with a “sector perform” rating.

“The announced transaction of IAA changes RBA’s growth story; however, it also doesn’t,” said Mr. Doumet “Prior to the deal, RBA’s strategy was to grow its market share in equipment auction market and expand its marketplace/service offering into the broader $300 billion global used equipment market. While the potential growth in the equipment space is diluted with the combination of IAA, it is combined with growth opportunities in autos and the two can conceivably be accelerated. Where we like this deal most: the businesses have similar cost structures (i.e. physical lots, digital auction spend, etc.) and, therefore, the combination will enable cost synergies (more than $100 million) and cost avoidance/efficiencies going forward.”


While warning macroeconomic headwinds are likely to continue to weigh on its financial results, Stifel analyst Martin Landry thinks Sleep Country Canada Holdings Inc.’s (ZZZ-T) valuation “remains appealing.”

Shares of the Toronto-based retailer slid 1.2 per cent on Monday following weaker-than-anticipated third quarter, which he attributed to a difficult comparable period and weakening consumer confidence.

“The demand softness was expected but the magnitude of the impact was higher than expected as deterioration appears to have accelerated in September,” he said.

For the quarter, Sleep Country reported earnings per share of 89 cents, down 16 per cent year-over-year and below both Mr. Landry’s 98-cent estimate and the consensus forecast of 97 cents.

“The company was up against a difficult year-over-year comparable period due to Q3/21 sales being boosted by pentup demand, as restrictions eased in the second half of June 2021,” he said. “This dynamic, coupled with a rapidly deteriorating consumer confidence resulted in same-store sales declining more than 11 per cent year-over-year. Hence, we estimate the monthly deterioration could have looked similar to a decline of 6-8 per cent in July (including the 4 per cenbt attributed to pent-up demand), a decline of 8-10 per cent in August and a decline of more than 15 per cent in September.”

Mr. Landry expects similar struggles to be exhibited in the fourth quarter, anticipating demand to “remain muted” and leading him to cut his earnings per share projections for 2022 by 8 per cent and 2023 by 15 per cent on lower same-store sales growth and “slight” margin pressure.

“Weak traffic patterns have continued into October according to management at a similar pace to September, suggesting that in Q4/22 ZZZ could experience double-digit declines in same-store-sales again,” he said. “Management mentioned that Q3/22 unit volumes were down 15-20 per cent year-over-year for mattresses in the lower end segment (i.e., below $1,000), a trend which started earlier this year but accelerated recently.”

“Longer term, ZZZ should come out of an economic slowdown stronger with market share gains coming from attrition of industry participants. Even with our revised 2023 estimates, which have decreased by 15 per cent, ZZZ’s valuation is appealing at 5 times EBITDA and 8 times earnings. Sleep Country has an iconic brand, a leadership position with 40-per-cent market share, bargaining power with manufacturers and a healthy balance sheet providing optionality. While near-term catalyst may not be apparent, patient investors should be rewarded.

With his reduced estimates, Mr. Landry cut his target for Sleep Country shares by $5 to $28, maintaining a “buy” rating. The average target on the Street is currently $27.83.

“Our visibility remains limited on the potential downside risk to our estimates, but we believe that ZZZ’s current valuation provide investors with a significant buffer should our estimates be too high,” he said.

Elsewhere, other analysts making target adjustments include:

* BMO’s Stephen MacLeod to $31 from $36 with an “outperform” rating.

“Unsurprisingly, macro uncertainty accelerated through Q3, weighing on SSSG; we expect this to continue in Q4/22E and acknowledge the demand backdrop will remain challenging into 2023,” he said. “With the stock down 44 per cent year-to-date and undervalued, in our view, this is more than reflected in the stock (we estimate the stock is discounting a 35-40-per-cent 2023 revenue decline) opening the door for upside surprises to be positive for the stock. We see attractive risk-reward (4.3 times 2023 estimated EV/EBITDA, 20-per-cent FCF yield), given Sleep Country’s multi-year opportunity for growth and market-share gains for everything ‘sleep.’”

* RBC’s Sabahat Khan to $26 from $28 with a “sector perform” rating.

“We believe the negative share price reaction [Monday] morning was driven by Q3 results, which reflected the impact of weakening macro conditions (e.g., higher interest rates) and consumer confidence, which have resulted in moderating sales/traffic since September,” said Mr. Khan. “Furthermore, as the company works through inventory built up during peak supply chain headwinds (which have eased but not fully abated), management expects to see a 100bps GM % impact on a quarrer-over-quarter basis next quarter. Management did highlight, however, that consumers have been deferring their mattress/big ticket item purchases rather than trading down. Overall, we remain cautious on the outlook as we expect sales and margin headwinds to continue weighing on Sleep Country’s results in the short-term.”

* National Bank’s Vishal Shreedhar to $28 from $35 with a “sector perform” rating.

* CIBC World Markets’ John Zamparo to $24 from $29 with an “outperformer” rating.


Despite hydrogen technology “moving forward,” the near-term sales outlook for Ballard Power Systems Inc. (BLDP-Q, BLDP-T) could be “soft,” according to National Bank Financial analyst Rupert Merer.

That market view led him to lower his recommendation for the Burnaby, B.C.-based fuel cell maker to “sector perform” from “outperform” following its third-quarter results.

On Monday, Ballard reported total revenue of US$21.3-million for the quarter, largely in line with Mr. Merer’s US$22.9-million estimate and the Street’s expectation of US$23.6-million. An adjusted EBITDA loss of $35.1-milllion, adjusted for stock compensation, acquisition costs and FX headwinds, was narrowly higher than his projection of a loss of US$34.2-million but beat the consensus of a US$35.6-million loss.

“BLDP’s order book (12 mo) stands at $51-million, down quarter-over-quarter from $61-million,” the analyst said. “We are forecasting revenue in ‘22 down 17 per cent year-over-year. With that, we believe Q4 could be soft. However, during Q3, sales momentum picked up across Europe, with new orders in rail and marine markets. Its total backlog grew 11 per cent quarter-over-quarter and now stands at $101.7-million (w/55 per cent of orders from Europe). The U.S. markets could pick up with support from the IRA and hydrogen hub subsidies. China has lagged expectations but could see growth towards its 2025 fuel cell targets.”

Though he lowered his revenue forecast for the next year, Mr. Merer emphasized Ballard is “well capitalized and focused on the right things.”

“BBLDP ended Q3 with $955-million in cash, and has sufficient liquidity for the next few years,” he said. “We believe it will be conservative with its balance sheet, prioritizing investment into capacity to manufacture locally in the EU, the U.S. and China. It plans to invest $130-million through 2025 to build a new MEA manufacturing facility in China and R&D centre in Shanghai to further its position. We like its leading market position and focus on cost reduction in its core fuel cell markets. Although margins could remain under pressure near term, as BLDP ramps up, it should see a benefit to cost from scale.”

Mr. Merer cut his target for Ballard shares to US$8 from US$12. The average on the Street is US$10.51.

“The hydrogen fuel cell and infrastructure peer group has sold off, down more than 30 per cent in the past three months,” he said. “This can be explained by headwinds from rising bond yields, recession fears and slower than anticipated growth. With the peer valuations in the sector tracking relatively closely, we have moved our target to an EV/Revenue multiple based valuation, as our DCF model is skewed more towards the terminal value and inflection point across the hydrogen sector could be a few years out.”

“We lower our rating to Sector Perform (was Outperform) as BLDP’s near-term revenue outlook appears soft. BLDP expects to hold an Investor Day event in early 2023, where we would look for more colour on its growth targets, cost reduction efforts, manufacturing capabilities and sales outlook.”

Other analysts making changes include:

* Citi’s PJ Juvekar to US$6.30 from US$7.50 with a “neutral” rating.

“Our top three takeaways from BLDP’s earnings call include: 1) Margins will remain under pressure through next year until volumes ramp up; 2) China fuel cell (FC) policy and adoption remains delayed. BLDP plans to build a $130-million MEA manufacturing facility and R&D center in Shanghai. The plant is expected to start up in 2025 with capacity of 13mm MEAs, cheaper than producing and shipping from Vancouver with an expected escalating duty (3-5 per cent today to 8-15 per cent by 2025); 3) The first commercial order in trains was for 14 FC modules to power Siemen’s Mireo Plus H passenger trains with an LOI for up to an additional 200 modules over 6 years,” said Mr. Juvekar.

* Lake Street Capital’s Robert Brown to US$19 from US$32 with a “buy” rating.

“Ballard has built an excellent foundation of partnerships and products, and it is seeing traction in its four key markets: heavy-duty truck, bus, marine, and rail, with incremental orders and new development programs,” he said. “Q3 was below expectations due to timing, but macro trends remain strong as Ballard continues to receive meaningful orders in the rail market and the bus market. Also, the new MEA facility planned to be constructed in China is a bullish step despite the near-term delays.”

* Raymond James’ Michael Glen to US$6 from US$10 with a “market perform” rating.

“We continue to have a favourable long-term view on Ballard’s growth prospects, but continue to see some near-term headwinds in terms of key markets — namely Europe and China,” he said. “Additionally, we need to further assess the competitive implications of the negative gross margin, which is clearly not sustainable. Management described a very competitive fuel-cell market during the call, with competition aggressively pursuing platform wins, and Ballard seeking to engage potential customers early in the development / pilot stages.”

* Susquehanna’s Biju Perincheril to US$6 from US$6.50 with a “neutral” rating.

* Piper Sandler’s Kashy Harrison to US$4 from US$5 with an “underweight” rating.

* CIBC’s Hamir Patel to US$5.50 from US$9 with a “neutral” rating.


A group of equity analysts on the Street revised their recommendations for Summit Industrial Income REIT (SMU.UN-T) after Monday’s announcement of its $4.5-billion sale to GIC, Singapore’s giant sovereign wealth fund, in a joint venture with Dream Industrial REIT (DIR-UN-T)

Canaccord Genuity’s Mark Rothschild thinks the deal looks “fair” compared to other recent transactions in the real estate sector, pointing to Blackstone’s US$3.1-billion acquisition of WPT REIT in November of 2021 and Prologis’ US$23-billion acquisition of Duke Realty last month.

“Though the mark-to-market of rental rates is substantial, and Summit is poised to grow cash flow dramatically over the next few years, we believe the offer is attractive for Summit unitholders, and expect the transaction to close successfully,” he said.

“The transaction represents an implied cap rate of 3.4 per cent or a 19.5-per-cent premium to consensus NAV. Additionally, the offer price equates to a 31.1-per-cent premium to the unaffected unit price and a one-year forward AFFO multiple of 29.3 times AFFO.”

He believes the agreement is “positive” for Summit’s Canadian industrial REIT peers, particularly Granite REIT (GRT.UN-T), Parkit Enterprise Inc. (PKT-X), Dream Industrial REIT (DIR.UN-T) and Nexus Industrial REIT (NXR.UN-T).

“Additionally, we note that Choice Properties derives 16 per cent of total NOI from industrial properties. We believe this transaction highlights that while it might be difficult to confidently assign cap rates for properties in most asset classes, there remain large pools of capital looking to acquire industrial properties and capture the large spread between market rental rates and in place rents,” he said.

“Rental rates for industrial properties in Canada’s largest markets have increased substantially over the past few years as availability is extremely low. Among public Canadian REITs, Summit has the greatest exposure to the tightest markets where fundamentals are robust. The REIT derives 54.5 per cent of same-property NOI from properties located in Ontario, which are largely located along major transportation routes inside and surrounding the GTA.”

Mr. Rothschild moved his recommendation to “hold” from “buy” with a $23.50 target to reflect the acquisition price, up from $22. The average on the Street is $22.54.

Others making changes include:

* Desjardins Securities’ Kyle Stanley to “tender” from “buy” previously.

“In our view, SMU has long been an M&A candidate; however, interest rate volatility and its negative 24-per-cent year-to-date price-only return made a near-term transaction less probable,” he said. “In the context of the current financing environment, we believe the proposed $23.50 per unit is fair, supported by the fact that the stock peaked at $23.89 on November 4, 2021 (approximately 2 per cent above the deal price), at a time when we believed a takeout was being priced in.”

* Raymond James’ Brad Sturges to “market perform” from “outperform” with a $23.50 target, up from $23.

“Particularly in the context of the challenging equity market and macro environment conditions, we initially view the proposed takeover offer for Summit to be reasonably fair. As such, we are currently assigning a lower probability that a superior offer will be received by Summit above the proposed $23.50/unit all-cash offer,” he said.

* CIBC World Markets’ Dean Wilkinson to “tender” from “neutral” with a $23.50 target, up from $21.


After it displayed “soft” annual recurring revenue results in the third quarter, Thinkific Labs Inc. (THNC-T) was downgraded to a “market perform” from “outperform” by BMO Nesbitt Burns analyst Thanos Moschopoulos.

“We believe the health of any SaaS business needs to be judged by its unit economics, and we’re apprehensive that THNC hasn’t been showing more progress on this front,” he said. “We think the downside to the stock is likely limited, given that THNC is roughly trading at cash value, with plenty of cash runway; however, our ratings are relative calls, and we don’t view valuation alone as sufficient reason to remain positive on the stock, within the context of our coverage universe.”

After the bell on Monday, the Vancouver-based software company, which provides a platform for entrepreneurs and businesses to create and run online courses, reported revenue of $13.3-million, up 34 per cent year-over-year and in line with the Street’s estimate of $13.2-million. An adjusted EBITDA loss of $5.7-million was narrowly better than expected (a loss of $6.1-million).

It saw ARR growth of $50.9-million, or 24 per cent year-over-year, which Mr. Moschopoulos deemed “soft.” He noted it gained “only” $0.6-million from the second quarter versus $6.8-million of sales/marketing spending, which represents the softest new quarter-over-quarter ARR growth over the past eleven quarters.

“The subscriber count, at 33,300, was flat quarter-over-quarter (for the second consecutive quarter) and 9 per cent year-over-year,” the analyst said. “THNC conceded that it has more work to do in optimizing its sales/marketing execution, and is addressing this with the help of its recently appointed president, Steve Krenzer.”

After reducing his revenue estimates and raising his EBITDA projections, Mr. Moschopoulos cut his target for Thinkific shares to $2 from $2.70. The average on the Street is $4.81.

“THNC currently has roughly $1.60 per share in cash, and we expect this to decline to $1.25 by the end of CY2023. We think THNC has sufficient cash runway to ultimately achieve profitability, assuming it can improve its sales/marketing efficiency, but we believe that profitability is more than two years away,” he said.

Elsewhere, Canaccord Genuity’s Robert Young downgraded Thinkific to “speculative buy” from “buy” and cut his target to $3 from $5.

“The bump in incremental ARR to $3.8-million seen last quarter driven by pricing adjustments was temporary as ARR returned to trend with $0.6-million added in Q3 and guidance implying a similar performance in Q4,” said Mr. Young. “On the more positive side, payments attach remains ahead of plan, with GPV reaching 18 per cent of GMV. Management highlights churn metrics consistent across cohorts albeit with weak conversion from free plans. As well, ARPU continues to advance due to payments adoption, plan upgrades and Thinkific Plus plans. Going forward, management continues to see EBITDA loss trending lower as a proportion of sales as cost optimization progresses. While the risk of a prolonged turnaround limits upside, in our view, shares are trading at a narrow premium to the current US$95-milion/C$129-million cash balance, limiting downside.”

ATB Capital Markets’ Martin Toner cut his target to $5.50 from $8, maintaining an “outperform” rating.

“Management has demonstrated control over the bottom line; however, revenue growth has become a problem. The Company is in the middle of a transition in its go-to-market approach post COVID-19. The transition is having a larger-than-anticipated impact on near-term revenue growth, and we have reduced our 2023 estimates and target price as a result,” said Mr. Toner.


Ahead of the release of its first-quarter 2023 financial results on Nov. 10. Canaccord Genuity analyst Robert Young lowered his full-year expectations for Dye & Durham Ltd. (DND-T) based on expected headwinds from slower property transactions, including “significantly” lower activity in Canada.

“After considering recent weakness in real estate transaction activity data in Canada, Australia, and the UK, we have taken a more conservative view on F2023,” he said. “Among the three geographies, Canadian residential sales in CQ3 appear to be most impacted on a year-over-year and sequential basis, whereas the UK and Australia are flat to moderately lower on a sequential basis. As of FQ4, Canada accounts for 60 per cent of revenue (Canada real estate 35-40 per cent of total revenue), with the UK at 29 per cent and Australia at 11 per cent.

“Given the rapid rise in interest rates across the three geographies and macro/rate uncertainty going forward, we expect real estate activity to remain under pressure over the next few quarters. As a result, we are reducing our revenue and adj. EBITDA estimates for 2023 by 10 per cent. We also expect FX headwinds of 1-2 per cent sequentially and 4-5 per cent year-over-year.”

Keeping a “buy” rating for the Vancouver-based company’s shares, he cut his target to $30 from $38 based on lower estimates “given a higher risk outlook and macro headwinds as well as uncertainty related to a Link transaction.” The average on the Street is $29.60.


In other analyst actions:

* TD Securities’ Graham Ryding downgraded Power Corp. of Canada (POW-T) to “hold” from “buy” with a $35 target, down from $41. Others making changes include: Barclays’ John Aiken to $35 from $38 with an “equal weight” rating and BMO’s Tom MacKinnon to $36 from $37 with a “market perform” rating. The average is $37.75.

* Raymond James’ Andrew Bradford lowered Ensign Energy Services Inc. (ESI-T) to “market perform” from “outperform” but raised his target to $6.25 from $6. The average is $5.61.

“The looming 2024 unsecured debt maturity and limited liquidity on the credit facility is constraining Ensign’s capital allocation,” he said. “Ensign will need to allocate the bulk of its 2023 discretionary cash flow to debt reduction/repurchases to improve its refinancing prospects, which we expect will come in 2023. A favourable macro backdrop and limited working capital requirements would enable ESI to reduce the balance on the required credit instrument meaningfully, but the terms will ultimately be dictated by the state of the high yield market. Ensign’s Apr-2024 9.25-per-cent notes are priced at 90.85, implying a 16.5-per-cent yield to maturity.

“We expect ESI will ultimately be able to refinance these notes, but the focus on the balance sheet is not without a cost — it will come at the expense of its 2023 upgrade capital potential, which we believe will have a detrimental impact on Ensign’s market share.”

* ATB Capital Markets’ Martin Toner initiated coverage of Blackline Safety Corp. (BLN-T) with an “outperform” rating and $3.50 target. The average on the Street is $5.08.

“Blackline Safety Corp. is the technological leader in connected gas detection devices, an industry undergoing technology-enabled transformation,” said Mr. Toner. “Despite the availability of connected technology in handheld devices, only a small percentage of workers are connected. Blackline Safety’s always-connected devices have profound implications for worker safety and workforce productivity. The Company has an attractive and improving business model. Gas detection hardware creates a sticky customer base and a software and service revenue stream that carries high gross margin. After experiencing significant losses in recent years pursuing product development and growth, Blackline Safety is in the process of rightsizing its cost structure. We believe cost reductions, net working capital improvements, and a price increase will rapidly improve the cash flow profile. We believe Blackline Safety has a multiple year growth opportunity and a high quality business model that will become profitable at scale and should be attractive to investors.”

* National Bank’s Michael Parkin lowered his targets for Barrick Gold Corp. (ABX-T) to $24 from $25 with a “sector perform” rating and Newmont Corp. (NGT-T) to $76 from $79 with an “outperform” rating. The average is $31 and $65.50, respectively.

* National Bank’s Jaeme Gloyn increased his Brookfield Business Partners L.P. (BBU-N, BBU.UN-T) target to US$38 from US$36 with an “outperform” rating. The average is US$33.86.

* Prior to the release of its third-quarter results after the bell on Tuesday, Scotia Capital’s Himanshu Gupta dropped his BSR REIT (HOM.U-T) target to US$18.50 from US$22, keeping a “sector outperform” rating. The average is US$21.58.

* Credit Suisse’s Andrew Kuske raised his Capital Power Corp. (CPX-T) target to $56 from $53 with an “outperform” rating. The average is $51.23.

“Given the [third-quarter] print’s strength, we found the stock ensuing weakness a bit odd and maintain a rather constructive view for the company,” said Mr. Kuske. “The Alberta power market remains a key area of focus for the stock given pricing dynamics along with some concerns on potential political changes with an upcoming election cycle about to ramp up. Putting aside power market dynamics, CPX’s positioning in Alberta’s carbon capture theme with a utilization angle is interesting and a small area with potential to watch. Beyond Alberta, CPX looks to face many opportunities in core Canadian markets like Ontario along with a variety of efforts in the US – both renewable and natural gas plants.”

* After “solid” second-quarter results, National Bank’s Richard Tse trimmed his Coveo Solutions Inc. (CVO-T) target to $11 from $13, keeping an “outperform” rating. Others making changes include: BMO’s Thanos Moschopoulos to $8 from $9 with an “outperform” rating, RBC’s Paul Treiber to $9 from $11 with an “outperform” rating and Scotia Capital’s David Weiss to $9 from $11 with a “sector outperform” rating. The average is $8.94.

“In our view, the FQ2 results has Coveo tracking largely in line with the investment thesis laid out in our initiation, Automating Insight,” he said. “The thesis was (and continues to be) that Coveo is democratizing Artificial Intelligence (AI) for the enterprise masses, enabling a secular step function up in technology for those enterprises who lack the scale and expertise to develop those solutions in-house. Coveo’s proven platform combined with a powerful ecosystem (including native integrations with some of the most pervasive and prolific enterprise applications) has allowed the Company to become a leader in its respective market known as Insight Engines.”

* CIBC’s John Zamparo lowered his target for Cronos Group Inc. (CRON-Q, CRON-T) to US$3.50 from US$4, below the US$4.19 average, with an “outperformer” rating, while Canaccord Genuity’s Matt Bottomley trimmed his target to $4.75 from $5 with a “buy” rating.

* Raymond James’ Andrew Bradford trimmed his target for Essential Energy Services Ltd. (ESN-T) to 55 cents from 60 cents with a “market perform” rating. The average is 57 cents.

“We are increasing our 2023 outlook for Essential; now looking for $23 mln v $21 mln, previously. But we are also lowering our target as a function of the lower multiple range the market has established for Essential,” said Mr. Bradford.

“Strategically, we don’t envision that Essential’s core markets (coiled tubing and downhole tools) will require meaningful growth capital over our forecasting horizon. This is both beneficial for Essential and a detriment of sorts. On the benefits side of the ledger, Essential won’t likely be called upon to expend meaningful capital for growth, thus preserving its free cash for balance sheet improvement or other direct shareholder initiatives. On the other hand, investors tend to be attracted to small cap companies for their growth potential in the first place.”

* BMO’s Jackie Przybylowski raised her Franco-Nevada Corp. (FNV-N, FNV-T) target to $247 from $224 with an “outperform” rating. The average is $209.35.

“Franco-Nevada reported a quarter that is in line with or modestly below expectations on EPS and sales,” she said. “Energy assets drove record revenue year-to-date 2022, according to the company. Franco-Nevada made three portfolio additions during the quarter, two royalties and one stream, while maintaining strong liquidity. Guidance for total GEO sales and precious metals GEO sales were unchanged for the full year 2022.”

* Raymond James’ Patrick Brown reduced his GFL Environmental Inc. (GFL-N, GFL-T) target to US$35 from US$37 with an “outperform” rating. The average is US$39.40.

* After updating his 2022-24 outlook to reflect its “impressive” third-quarter results, RBC’s Greg Pardy raised his Imperial Oil Ltd. (IMO-T) target to $81 from $79 with an “outperform” rating. The average is $76.12.

“Our bullish stance towards Imperial Oil reflects its capable leadership team, favorable long-term operating outlook, strong balance sheet and commitment to shareholder returns,” said Mr. Pardy.

* JP Morgan’s Ryan Brinkman trimmed his Magna International Inc. (MGA-N, MG-T) target to US$74 from US$75 with an “overweight” rating, while Benchmark’s Michael Ward cut his target to US$73 from US$77 with an “overweight” rating. The average is US$72.

“In our view, MGA is considered among the top suppliers by global vehicle manufacturers and the other suppliers. The company is the third largest supplier globally, enjoys a leading competitive position in most of its key product offerings, a diverse customer base, and the company is well positioned to benefit from developing industry technologies. Since the beginning of 2020 MGA has been valued at 6.5 times trailing income on an EV/EBITDA basis and 15.4 times trailing income on a P/E basis. Valuation, above market growth, and historical cash returns are the primary variables supporting our Buy rating on the stock,” said Mr. Ward.

* BMO’s John Gibson bumped his target for PHX Energy Services Corp. (PHX-T) to $12 from $10 with an “outperform” rating. The average is $10.80.

* Raymond James’ Michael Shaw raised his target for Suncor Energy Inc. (SU-T) to $53 from $50 with a “market perform” rating. The average is $54.79.

“We recognize the attractive relative valuation on Suncor and the macro tailwinds behind its best-in-class downstream assets,” he said. “Nonetheless, our Market Perform rating is predicated on: 1) concerns around the operating/capital outlook in the mining portfolio; and, 2) the widely appreciated need to improve its safety record.

“Suncor provided fairly limited details on the 36-month turnaround plan at Fort Hills and the implication for the broader mining operations, instead promising to provide more details at the Investor Open House at the end of the month. We will be looking for more detail on the medium-term capital costs required of the project and the implications for free cash flow and shareholder returns.”

* BMO’s Tim Casey trimmed his Telus Corp. (T-T) target to $35, remaining above the $33 average, from $37 with an “outperform” rating.

“TELUS showed strong growth momentum in Q3 with results above Street expectations,” he said. “Core telecom operations performed well with service revenue and EBITDA growth of 7 per cent and 8 per cent, respectively. Subscriber loading was better than expected and churn remained stable. The company raised its dividend by 3.7 per cent. We remain Outperform on TELUS based on their dividend growth profile, differentiated asset mix, strong track record, and an accelerating FCF growth beginning in 2023.”

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