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

Canaccord Genuity raised its price target on Bank of Nova Scotia (BNS-T) after the bank’s third quarter results of $1.88 beat adjusted earnings expectations of $1.85.

“BNS reported a slight adjusted EPS beat, but excluding better-than-expected credit provisions (notably a reversal on provisions for performing loans) would have delivered relatively in-line earning results. We made several minor adjustments that were largely offsetting. We would like to get a better handle on earnings growth visibility before getting more constructive on BNS stock. For F19 / F20, we forecast flattish EPS growth (unchanged) and 6 per cent, respectively (slightly below 7 per cent+ medium-term EPS target),” said analyst Scott Chan.

He kept his “hold” rating and raised his price target to $74 from $73. The median price target is $80.

“Our $74 target price is based on a 9.9 times P/E multiple applied to our F20 EPS estimate of $7.53. Our target multiple represents a 6 per cent discount to the target multiple average of 10.5 times that Canaccord Genuity applies in valuing large Canadian banks,” he said.

“BNS updated their acquisition accretion target for next year. Recall, the firm deployed [about] $7-billion of capital over the past few years mainly to fund BBVA Chile, MD, and JF. Management expects a total earnings contribution in F19 / F20 of $250-million and >$400-million, respectively. Excluding the company’s equity issuance (~34M shares), we estimate BNS now targets adjusted EPS accretion of >$0.15 (or >2 per cent). The slightly higher F20 target mainly reflects better-than-expected accretion on their Wealth transactions,” he said.

“Total bank PCLs of $713-million came in better than the Street at $744-million (CGe: $734-million). Impaired loans of $776-million (52 bps) compares to their historical average of 46 bps (since 1990). The main variance related to provisions on performing loans at -$63-million (or -4 bps) mainly from favourable macro economic trends. We view this as very low quality considering peer reporting thus far in FQ3 have seen banks building reserves on performing loans (stage 1 & 2). This came as a surprise to us considering BNS’s International bent. Credit quality should improve based on divestitures of certain International segments (e.g. sale of Puerto Rico, U.S. Virgin Island & Other assets are expected to reduce total GILs by ~10%).”

Desjardins kept its “buy” rating on the stock and its $80 price target.

RBC Capital Markets kept its “sector perform” rating but cut its price target to $80 from $82. “BNS’ adjusted EPS of $1.88 was below our estimate of $1.94 but above consensus of $1.85.”

CIBC kept its “neutral” rating on the stock and its $77 price target. However, it reduced its F2020 EPS estimate. “For F2019E, we are at $7.13 (was $7.11). For F2020E, we are at $7.45 (was $7.57).”

“As of 8/27/2019, the shares traded at 9.2 times our F2020 EPS estimate, compared with the peer average of 9.3 times.”


RBC Capital Markets cut its price target on Bank of Montreal (BMO-T) after the bank reported third quarter results that were below its expectations.

“BMO’s adjusted EPS [earnings per share] of $2.38 was below our estimate of $2.50 (and consensus of $2.49). The “miss” was mainly due to higher provisions for credit losses (PCLs) although a few credit impacts seem one time or temporary in nature. Credit indicators generally looked “fine”/stable in our view and management said they are not seeing any concerning credit trends at this time. The bank reiterated guidance for a total PCL ratio in the low to mid-20 bps range going forward. We have modelled a PCL ratio of 21 bps in 2019 and 23 bps in 2020,” said analyst Darko Mihelic.

We are “not fussed with higher PCLs but loan/revenue growth may start to slow from here. We still expect good EPS growth and we still view this stock as relatively defensive,” he said.

He kept his “outperform” rating but cut his price target to $111 from $113. The median is $107.

“BMO is trading at 8.8 times our 2020 core EPS estimate vs. an average 9.0 times for the other large Canadian banks under our coverage. On a P/B [price/book] basis the stock is trading at 1.26 times book value, relatively in line with its historical average discount to peers,” he said.

Desjardins said “cash EPS missed our estimate and consensus. The answer to our burning question from 2Q FY19 is: No, PCLs cannot remain this low. We lowered estimates but maintained our $105 target and ‘Hold’ rating.”

CIBC kept its “neutral” rating on the stock but lowered it price target to $105 from $111.

“We are comfortable with management’s explanations on credit quality and expect losses to settle back down in coming quarters. The margin discussion, however, takes our estimates lower, consistent with what we have done for the other banks as we refine our assumptions for the current rate environment (though the impact on the consolidated margin is not as pronounced as the segment discussion might otherwise suggest). As of 8/27/2019, the shares traded at 9.0 times our F2020 EPS estimate, compared with the peer average of 9.3 times.”


Citi Research cut its price target for Autodesk (ADSK-Q) after the company posted solid second quarter results but lowered its fiscal 2020 guidance.

“ADSK lowered FY20 guidance on incremental macro uncertainty with modest reductions to ARR [annual recurring revenue], revenue and FCF [free cash flow] (US$50-million or 4 per cent). FX [foreign exchange] headwinds (US$15-million) are driving [about] half the lower revenue guidance (US$30-million), but we still see the magnitude of the reduced ARR guide (US$70-million) as suggestive of a bigger reduction in 2H19 demand expectations,” said analyst Tyler Radke.

“Autodesk is not immune to the impact of a weaker macro environment. While we continue to see more resiliency under a subscription model, a meaningful downturn would have a negative impact to our estimates and long-term targets. Management is still maintaining FY23 targets on the expectation that the slowdown is temporary, which is difficult to put significant confidence towards. We continue to watch the macro environment carefully and lower our FY20-23 estimates modestly given the more cautious outlook,” he said.

“Our positive view on ADSK has centered around a) the opportunity for AEC digitization, with a broader construction product portfolio, and b) subscription tailwinds continuing driven by M2S, legacy/non-compliant conversions and cloud upsell. These drivers still appear intact, coming in ahead of expectations in 2Q20, while the reduction in the guidance appears to be mainly from manufacturing (where weakness was less of a surprise). Given these factors and shares that now trade at just 19 times CY20E EV [enterprise value]/FCF [free cash flow], we maintain our Buy rating. If we see continued macro softening, or less optimistic AEC / subscription data points, we would consider becoming less constructive.”

He kept his “buy” rating on the stock but cut his price target to US$186, down from US$210 “on modestly lower estimates.” The median price target is US$182.50, according to Zack’s Investment Research.

Canaccord Genuity kept its “buy” rating on the stock but cit its price target to US$160 from US$190.


Beacon Securities Ltd. cut its price target on Ianthus Capital Holdings Inc. (IAN-CN) after its second quarter results fell short of expectations.

“IAN reported revenue/adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] of $19-million/($5-million). This represents quarter over quarter revenue growth of 100 per cent from just over $9-million in the first quarter of 2019, as this represents the first full quarter contribution from the acquisition of MPX Bioceuticals, which was completed in early February. These results fell short of consensus expectations for revenue/EBITDA of $21-million/($6-million). We had expected an EBITDA loss of $8-million, so while the top line was short of our forecast, management’s cost control efforts are worth noting,” said analyst Russell Stanley.

“Following the release of the Q2/19 results yesterday, we are reducing our F2019 and F2020 estimates. We are also introducing estimates for F2021, and rolling forward our valuation, using a 15 times EV/2021E EBITDA multiple, which is in line with the multiple we use to value other multistate operators. We continue to believe IAN is well positioned in some of the most attractive cannabis markets in the U.S., and our forecast revisions are intended to better reflect the likely ramp up time required to monetize those opportunities. While our F2021 forecast is roughly in line with consensus, our F2020 estimates are well below current consensus, reflecting our view that the revenue ramp up may take more time than our peers currently assume,” he said.

He kept his “buy” rating on the stock but cut his price target to $8 from $12. There is no median price target.

“IAN is now trading at 7 times our F2021 EBITDA forecast. This represents a 16 per cent discount to the 8 times average for the broad peer group, and a 13 per cent premium to the 6 times average amongst U.S.-operators. Potential catalysts include additional buildout progress in Florida, closing of the $50-million in term debt announced earlier this month, and key dispensary openings in MA and NY in Q4/19.”

“We are reducing our revenue/EBITDA estimates for F2019 from $123-million/($16-million) to $79-million/($27-million) to reflect revised buildout forecasts, particularly for Florida and Massachusetts. We are similarly reducing our F2020 revenue/EBITDA estimates from $313-million/$93-million to $260-million/$34-million,” he said.

Canaccord Genuity kept its “speculative buy” rating but cut its price target to $10 from $11.


CIBC cut its price target on Canopy Rivers Inc. (RIV-X) but remains positive on the stock amid challenges in the industry.

“The entire cannabis industry is reeling from an exodus of investors, even as the broader market sustains positive ground (approx. -35 per cent six-month return for the industry vs. the S&P TSX’s +1 per cent). This juxtaposes June industry sales, which were up +1 per cent month over month (the third straight double-digit increase), but this industry has rarely traded on fundamentals. It may take time before one of U.S. regulatory action, outside investment from adjacent industries, or solid revenue and EBITDA generation can shift sentiment, but RIV remains our top pick in the sector owing to its capital allocation approach, guaranteed supply contracts, industry insights, and all-time low valuation,” said analyst John Zamparo.

He kept his “outperformer” rating on the stock but cut his price target to $7 from $8. The median is $8.

“The Canopy Rivers business model offers diversified exposure to the cannabis industry, but its NAV is dominated by three assets: PharmHouse, Mirabel and TerrAscend. As a publicly-traded company, valuing TerrAscend is simple enough. But the other two businesses are cultivation-focused. While investors are probably right to question the value of companies that simply focus on production, Rivers holds a winning hand with its guaranteed supply contracts. Pharmhouse has contractually sold 50 per cent of its production through 2022, while Mirabel has sold 100 per cent through 2021. Conservatively, this suggests these assets will generate cumulative EBITDA of ~$550-million over that time. The ~$360-million attributable to Rivers is +5 per cent higher than RIV’s entire enterprise value, and Rivers still has 14 more investments and ~$70-million in cash in its portfolio. The deferral of earnings and temporary removal of guidance for Canapar, RIV’s Italian asset, is disappointing, but it doesn’t reduce our conviction in the remainder of RIV’s business,” he said.


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