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

Carnival Corp. (CCL-N) shares are retesting their lows reached in the initial days of the pandemic-related shutdown of the cruise industry following a bearish take on the company’s future from Morgan Stanley analyst Jamie Rollo on Wednesday.

The analyst lowered his earnings expectations for the company and maintained an “underweight” rating, citing weaker-than-expected occupancies, softening pricing, and elevated costs, including fuel. His revenue forecast was cut 15% for the second half of 2022, on a slower-than-expected return of customers.

His price target was slashed to a Street low US$7, down from $13.

Mr. Rollo also presented a new bear case of zero dollars for the stock - a scenario he said could materialize if there’s a major new demand shock to the industry. Carnival, like its peers, has been struggling with high debt levels and there is concern new equity raises could dilute shareholder value.

“If the high yield market closes, and/or if there is a demand shock that causes trip cancellations or weak bookings (and hence customer deposit outflows), liquidity could quickly shrink. Even then, leverage looks unsustainably high we think, with net debt remaining greater than $30-billion for the foreseeable future, nearly triple its pre-Covid level,” Mr. Rolo was quoted by as saying.

“We think this needs to come down to under 4x fiscal year 2023, to about $20-billion or so, which implies a about a $12-billion equity raise. This is similar to CCL’s market cap, so could require a material, and therefore likely very dilutive, discount. If its equity value drops much further, it could become very challenging to raise this much,” the analyst said.

Some other analysts are not nearly as bearish on Carnival’s future. Barclays initiated coverage on the stock Wednesday with an “overweight” rating and a price target of US$14. And the average analyst price target is even higher, at US$16.95, according to Refinitiv Eikon data.

While Barclays says it expects consumer spending to slow in the economy, there will be a shift of preferences toward experiences and pent-up demand should cushion the blow. There “are plenty of pockets where risk/reward look compelling,” Barclays says.

Barclays also initiated coverage on Norwegian Cruise Line Holdings Ltd (NCLH-N) with an “equal weight” rating and price target of US$14, and on Royal Caribbean Group (RCL-N) with an “overweight” and price target of US$56.


CIBC World Markets analyst Stephanie Price has downgraded her rating on Cogeco Communications Inc (CCA-T) to “neutral” from “outperformer,” concerned with the growing wireless competition the company is facing in the U.S.

She also cut her target price to C$100 from C$126. The average Street target is C$121.95.

“We see an elevated level of competition in the U.S. with fixed wireless offerings a potential threat to Cogeco’s market share in its rural and under-served U.S. base,” Ms. Price said in a note to clients.

Fixed wireless internet offerings have become increasingly popular in rural areas of the U.S. The internet product is sent through airwaves from towers to receivers installed on a customer’s property. A major advantage is it doesn’t require phone or cable lines.

“Cogeco’s U.S. focus (excluding Florida and Ohio) has been in rural and underserved areas that, to date, have had limited competition given the cost to serve with wireline solutions. However, we see the U.S. as increasingly competitive, as fibre operators focus on winning back share from the cablecos and fixed wireless providers use excess spectrum capacity to aggressively roll out the broadband solutions across the footprint, including less populated areas. As the fixed wireless rollouts at the telcos have gained traction, estimates for internet net additions at the U.S. cablecos have slowed,” the analyst said.

She sees more stability in the Canadian marketplace, thanks partly to expansion in rural regions. Her new price target values Cogeco Communications at an enterprise value that is 6.5 times estimated 2023 EBITDA, which is in line with its five-year average.

The reduced price target on Cogeco Communications resulted in a price target cut as well for Cogeco Inc (CGO-T) - to C$84 from C$106.

“Even with the CCA price target reduction, CGO shares remain attractive, with a 20% return to our revised price target. We retain our outperformer rating,” she said.


Raymond James analyst Stephen Boland believes Canaccord Genuity Group Inc. (CF-T) is a valuable Canadian-headquartered wealth manager that the market is overlooking.

He initiated coverage on Canaccord, one of the largest independent investment banks in Canada, with an “outperform” rating and a C$11.50 target price. That’s still well below the average analyst target of C$15.

In a research note, he listed a number of reasons for his enthusiasm for the stock:

-It continues to diversify by geography. “In 2012, 76% of the total revenue was generated in Canada followed by the US at 13%. In 2022, only 34% of the revenue was generated in Canada, followed closely by US revenue which was 33%. The diversification was accomplished by strategic acquisitions and general organic growth in other operations,” he noted.

-The firm’s Capital Markets segment has been successful in catering to “the middle market” and the firm has been able to pivot quickly to enter new sectors that need capital and then tends to dominate the underwriting. That’s on top of the traditional Canadian sectors of mining and energy.

-From 2017 until the end of 2022, wealth management assets have increased to $96.1 billion from $38.6 billion, and that has provided two key positives, he said. “First, we believe the addition of these assets has helped reduce earnings volatility at the group level. Second, we believe the value of the wealth management assets are worth substantially more than the current market capitalization of CG. In essence, investors are buying the total wealth management assets at a discount with the Capital Markets revenue for free,” he said.

Meanwhile, Mr. Boland thinks the company’s current valuation is attractive relative to international peers.


Scotia Capital analyst Cameron Bean thinks Whitecap Resources Inc.’s (WCP-T) deal to acquire XTO Energy Canada for $1.7-billion suggests there’s upside in the stock prices he covers in other mid-cap energy names that have assets in the Montney region, many of which could now be takeover candidates.

“While the XTO assets come with an extensive land base, we see a higher level of delineation and at least as many clearly defined development locations from some names in our coverage group. Moreover, our coverage group trades at a material discount to the headline metrics from the transaction,” Mr. Bean said in a note to clients.

“We believe this points to valuation upside for the group, based our view that larger producers will continue to pursue deals to consolidate inventory rich assets,” he added.

The analyst sees Kelt Exploration Ltd. (KEL-T), Crew Energy Inc. (CR-T), and potentially Spartan Delta Corp. (SDE-T) as possible candidates to be taken over, and at premium valuations, due to their large Montney land positions and relatively low valuations. Meanwhile, he says Advantage Oil & Gas Ltd. (AAV-T) and Birchcliff Energy Ltd. (BIR-T) hold well delineated Montney land and extensive infrastructure positions that he thinks are materially undervalued in the market.

Imperial Oil Ltd. (IMO-T) said late Tuesday that it and ExxonMobil Canada have agreed to sell XTO and its Montney and Duvernay oil and gas-producing areas of central Alberta to Whitecap.

The sale is expected to close before the end of the third quarter, subject to regulatory approvals.

Analysts generally were supportive of the transaction.

“Overall, we view the event as positive for Imperial Oil with the public sale process of an asset that saw limited capital or management focus in recent years,” commented ATB Capital Markets analyst Patrick O’Rourke in a note.

He also saw it positive for Whitecap, and nudged up his price target on the stock to C$15.50 from $15. “While the nominal price at first blush is clearly very large, the assets were highly coveted (with a unique contiguous nature and large, mostly undeveloped, 639,000 net acres adjacent to core Montney developments) and subject to a competitive public sales process. The acquired inventory now positions WCP as a material Montney player with a long and expansive development inventory potential,” he said.


BofA Securities analyst Ebrahim H. Poonawala upgraded shares of Goldman Sachs Group Inc. (GS-N) to “buy” from “neutral,” arguing that the bank should fare better than its peers in an economic downturn. His price target went up to US$380 from $360.

“Our ratings change (first upgrade of 2022) does not indicate an improved outlook for bank stocks,” Mr. Poonawala said. “To the contrary, we see the stock as well-positioned to outperform in what is likely to be a worsening economic backdrop that could weigh more materially on the EPS outlooks for its balance sheet lending heavy peers.”

He noted that Goldman’s trading revenues could benefit from ongoing volatility in both geopolitics and monetary policy. But he cut his earnings estimate for 2022 to US$33.17 a share from $38.73 a share and his 2023 earnings estimate to $36.83 a share from $38.50 a share, Marketwatch reported.

The average Street target on Goldman is US$419.


In other analyst actions:

Burcon Nutrascience Corp (BU-T): Canaccord Genuity cuts target price to C$3 from C$3.50 and downgrades rating to “speculative buy” from “buy.”

Canopy Growth Corp (WEED-T): Wedbush cuts target price to C$13 from C$17

First Quantum Minerals Ltd (FM-T): Deutsche Bank cuts target price to C$34 from C$47

Goodfood Market Corp (FOOD-T): Raymond James cuts target price to C$2 from C$3

Pro REIT (PRV-T-T): Raymond James initiates with “market perform” rating with a C$7.75 target price

Airbnb Inc (ABNB-Q): JP Morgan cuts target price to US$110 from US$185

Alphabet Inc (GOOG-Q): JP Morgan cuts target price to US$2800 from US$3200

American Express Co (AXP-N): Citigroup cuts price target to $148 from $190

Altria Group Inc (MO-N): Barclays cuts target price to US$36 from US$53 and downgrades rating to “underweight” from “equal weight.” (AMZN-Q): JP Morgan cuts target price to US$175 from US$200

Bath & Body Works Inc (BBWI-N): JP Morgan downgrades to “neutral” from “overweight” and cuts target price to US$30 from US$63

Booking Holdings Inc (BKNG-Q): JP Morgan cuts target price to US$2435 from US$2900

eBay Inc (EBAY-Q): JP Morgan cuts target price to US$46 from US$54

Expedia Group Inc (EXPE-Q): JP Morgan cuts target price to US$125 from US$206

Intel Corp (INTC-Q): BofA Global Research cuts price objective to US$39 from US$47

KB Home (KBH-N): Raymond James cuts target price to US$44 from US$63

Lyft Inc (LYFT-Q): JP Morgan cuts target price to US$37 from US$56; Wedbush assumes coverage with outperform and US$32 target price

Marvell Technology (MRVL-Q): BofA Global Research cuts price objective to US$60 from US$90

Meta Platforms Inc (META-Q): JP Morgan cuts target price to US$225 from US$275; Monness Crespi Hardt cuts target price to US$250 from US$300

Netflix Inc (NFLX-Q): JP Morgan cuts target price to US$230 from US$300

Nike Inc (NKE-N): Baird cuts target price to US$140 from US$150; Barclays cuts target price to US$125 from US$140

Peloton Interactive Inc (PTON-Q): JP Morgan cuts target price to US$20 from US$24

Texas Instruments Inc (TSN-Q): BofA Global Research cuts price objective to US$175 from US$190 and downgrades rating to “neutral” from “buy”

Tripadvisor Inc (TRIP-Q): JP Morgan cuts target price to US$15 from US$23

Uber Technologies Inc (UBER-N): JP Morgan cuts target price to US$48 from US$60

With files from Reuters

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