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

An equity analyst on the Street downgraded red-hot Beyond Meat Inc. (BYND-Q) for the second consecutive day, as concerns about the vegan burger maker’s valuation following a massive post-IPO jump rise.

Sanford C. Bernstein & Co.'s Alexia Howard, who had been the last bullish analyst recommending the stock, lowered it to “market perform” from “outperform,” believing the shares are no longer worth buying.

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“The downgrade is driven by valuation considerations as the stock has traded in a highly volatile manner since its IPO likely due to its limited public float is now trading at 31 times EV/NTM Sales [enterprise value to next 12-month sales], implying limited upside potential from a valuation perspective,” she said.

Ms. Howard sees limited upside left in the shares, however she added: “Despite the valuation considerations, we continue to expect significant growth potential in the plant-based meat category and believe that Beyond Meat is well positioned as one of the frontrunners leading the new wave of plant-based meat products."

She set a target price of US$123 for the shares, which exceeds the current average target among analysts covering the company of US$96.01.

The downgrade comes a day after the stock dropped 25 per cent following a downgrade by JPMorgan, one of its underwriters.

Analyst Ken Goldman cut the stock rating to “neutral” from “overweight” based on “purely a valuation call.”

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Barclays analyst John Aiken made a series of rating changes in the Canadian financial services sector on Wednesday, expressing a preference for companies with higher international exposure.

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“We are taking the opportunity to rebalance our portfolio based on our expected total returns for our universe,” said Mr. Aiken in a research note. “Generally, the outlook for relative earnings outperformance is largely predicated on a company’s exposure outside of Canada. This also dictates our relative preferences amongst the sectors (with insurance having the largest exposure followed by the banks and the asset managers with the least), although we note that structural issues for companies within each segment can also dictate relative preferences amongst similar names.”

He raised his rating for a pair of stocks:

Toronto-Dominion Bank (TD-T) to “overweight” from “equal-weight” with a $84 target, up from $79. The average on the Street is $83.54.

Canadian Western Bank (CWB-T) to “equal-weight” from “under-weight” with a $31 target, rising from $30. The average is $31.69.

Mr. Aiken downgraded his ratings for 10 stocks. They are:

Canadian Imperial Bank of Commerce (CM-T) to “equal-weight” from “overweight” with a $113 target, down from $120. The average is $115.63.

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National Bank of Canada (NA-T) to “under-weight” from “equal-weight” with a $64 target. The average is $65.46.

Laurentian Bank of Canada (LB-T) to “equal-weight” from “overweight” with a $46 target, up from $45. The average is $42.64.

Sun Life Financial Inc. (SLF-T) to “equal-weight” from “overweight” with a $57 target, down from $58. The average is $56.45.

Great-West Lifeco Inc. (GWO-T) to “underweight” from “equal-weight” with a $32 target, down from $33. The average is $33.45.

Power Corp. of Canada (POW-T) to “underweight” from “equal-weight” with a $29 target, down from $31. The average is $32.06.

Power Financial Corp. (PWF-T) to “equal-weight” from “overweight” with a $32 target, down from $33. The average is $33.75.

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Intact Financial Corp. (IFC-T) to “equal-weight” from “overweight” with a $130 target, rising from $115. The average is $120.92.

CI Financial Corp. (CIX-T) to “underweight” from “equal-weight” with a $21 target. The average is $22.39.

ECN Capital Corp. (ECN-T) to “equal-weight” from “overweight” with a $4.75 target. The average is $5.09.

“We still see decent upside in our Equal Weight and Underweight ratings, but the relative expected performance of our Overweight ratings (average upside of 22 per cent) skews the rankings,” said Mr. Aiken.

“Consequently, we are not changing our Sector Outlook from Neutral."

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Keyera Corp.'s (KEY-T) $600-million hybrid note offering “provides confidence to investors,” according to Industrial Alliance Securities analyst Elias Foscolos.

On Tuesday after market close, the Calgary-based midstream energy company announced the offering of 6.875-per-cent fixed-to-floating rate subordinated notes due June 13, 2079. The net proceeds are to be used to fund Keyera’s ongoing capital program, repay indebtedness under its revolving credit facility, and for general corporate purposes.

“We do believe that the announcement has brought confidence to investors that KEY has its funding in line for its capital projects, mainly the Simonette Expansion and Wapiti,” said Mr. Foscolos.

He maintained a target price for Keyera shares of $40, which indicates 28-per-cent upside and leads to his unchanged “strong buy” rating. The average on the Street is $39.84.

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Desjardins Securities analyst Maher Yaghi expects to see slower-than-anticipated growth from Alithya Group Inc. (ALYA-T, ALYA-Q) when it reports fourth-quarter financial results before market open June 19.

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However, he remains bullish on long-term prospects for the Montreal-based strategy and digital technology firm.

“Based on CNR’s (CNR-T, “hold” rating, $128 target by Benoit Poirier) comments, we believe ALYA could face continued revenue headwinds in 4Q FY19 from the largest railroad in Canada,” said Mr. Yaghi. "In the most recent quarter, while contract wins with other clients offset the revenue decline from CNR, we expect a slight topline decline in ALYA’s Canadian revenue, leading to our estimate of $63.6-million. In terms of EBITDA, we forecast $1.5-million in 4Q FY19.

“The hiccup we foresee in the Canadian operations tempers our overall FY20 forecast. Hence, we are pushing back our estimate of when the company will hit run-rate guidance to 1H CY20 from fall CY19. Recall that management expects to reach run-rate revenue of $300–320-million and EBITDA of $22–24-million by the beginning of November 2019.”

Though he expects short-term volatility, Mr. Yaghi thinks Alithya’s business model is “strong” and expects it to continue to rely on M&A activity to gain scale and improve profitability over the longer term.

" While we expect ALYA to have gained new business in the quarter, we anticipate continued pressure from certain large clients in Canada," he said. “However, we continue to believe the company’s medium- to long-term prospects are attractive.”

Maintaining a “buy" rating, he shrunk his target to $5.75 from $6.75 after lowering his financial expectations modestly. The average target on the Street is $5.83.

“We recommend that investors buy the shares,” he said.

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Khiron Life Sciences Corp. (KHRN-X) is “firing on all cylinders,” according to Canaccord Genuity analyst Kimberly Hedlin, who said she came away from the company’s Investor Day event last week with a more bullish view of its go-to-market strategy.

“A key theme from Khiron’s investor day was that the company views itself as a CPG company rather than a cannabis cultivator,” she said. “Khiron is highly focused on building brands, consumer loyalty and distribution versus low-cost cultivation. Moreover, by focusing on multiple countries and implementing policies to protect investments, we believe the company is doing a good job managing risks. Being a first mover in Latin America is a central part of Khiron’s strategy and to that end the company is focused on leveraging its regulatory expertise to enter new markets prior to the implementation of comprehensive cannabis regulations.”

“In countries where regulations are immature or in the process of being developed (such as Chile, Brazil and Mexico), Khiron plans to develop compassionate care programs by working with hospitals and patient associations. Khiron’s compassionate care programs will leverage laws that permit the import of legal products by patients or their patient associations for medications that are not available through traditional channels. Based on these laws, hospitals and patient associations could purchase in bulk on behalf of patients, resulting in a faster and lower-cost distribution model. This is the company’s plan for Brazil and Mexico (as an interim measure).”

Maintaining a “speculative buy” rating for the stock, Ms. Hedlin, who is the lone analyst on the Street currently covering the stock, raised her target to $6.75 from $6 after hiking her sum-of-the-parts valuation.

“We see a number of significant potential catalysts that could result in a re-rating,” she said. “Khiron remains our Top Pick.”

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Abacus Health Products Inc. (ABCS-CN) is poised to become a leader in the topical pain relief and therapeutic skincare market through its all-natural, organic products containing CBD, according to Haywood Securities analyst Neal Gilmer.

He initiated coverage of the Toronto-based company’s stock with a “buy” rating.

“We believe the CBD market is poised to experience significant growth, particularly in the U.S. as more awareness of the benefits spread across the consumer base,” said Mr. Gilmer. “Abacus Health Products is poised to be a leader in the topical CBD market with first mover advantage and a line of proprietary products that are OTC FDA-registered. The Company launched its CBD Clinic product around 2 years ago and has recently commercialized its CBDMEDIC product to be distributed across pharmacies, supermarkets and other retail locations in the U.S. and international markets in the future. In our view we are in the very early stages of the consumer adoption of CBD products in general and more specifically topical products targeted for pain relief and therapeutic skin care.”

He set a $21 target for Abacus shares, which is a loonie short of the consensus.

“We believe the shares of Abacus are undervalued trading at 6.2 times versus the peer group at 14.4 times,” the analyst said. “The shares have been under pressure in the past month with some general overall weakness in the broader markets. We believe the 32-per-cent decline over the past month presents an attractive entry point for investors, ahead of the inflection point that should emerge in H2/19.”

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Calling it a “Golden State Warrior,” Clarus Securities analyst Noel Atkinson raised his rating for TerrAscend Corp. (TER-CN) following its recent acquisition of the California operations of The Apothecarium.

“The deal makes TerrAscend one of the largest retail dispensary operators in the Golden State,” he said. "This portion of the transaction closed sooner than expected, and the smaller Nevada assets of the business should be acquired in Q3.

“California is a highly attractive market for cannabis retail operators. It the largest state for legal cannabis sales in the U.S. and is expected to nearly triple in size between 2018 and 2022. In comparison to other mature adult-use states, California has far fewer dispensaries per capita. The California cannabis retail segment remains extremely fragmented and is ripe for consolidation.”

Moving the Toronto-based company to “buy” from “speculative buy,” Mr. Atkinson, currently the lone analyst covering the stock, raised his target to $12.75 from $12.50.

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In other analyst actions:

TD Securities analyst Sean Steuart raised Cascades Inc. (CAS-T) to “buy” from “hold” with an $11.50 target, rising from $11. The average on the Street is $11.25.

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