Inside the Market’s roundup of some of today’s key analyst actions
While he “liked” shares of Lululemon Athletica Inc. (LULU-Q) ahead of Tuesday’s release of its fourth-quarter financial results and 2023 outlook, Citi analyst Paul Lejuez now feels “even better” about the Vancouver-based activewear company.
That led him to raise his recommendation to “buy” from “neutral” in a research report titled Checking All the Boxes, All Systems Go.
“There are several investment highlights that support our Buy rating: (1) Inventory-to-sales gap better than expected and pathway to further improvement (with limited markdown pressure), (2) No signs of a sales slowdown with 1Q trends starting stronger than expected, underscoring LULU’s brand strength/momentum in its largest market, (3) China is poised to rapidly accelerate growth in F23 and become a much more meaningful long-term growth driver (8 per cent of F22 sales; we estimate 22 per cent by F27), (4) We model 20-per-cent-plus EPS growth annually through F27 as LULU unlocks its global growth potential, (5) Cheaper than NKE with LULU trading at an F23 estimated EV/EBITDA multiple of 14.7 times (in pre-market trading) vs NKE at 18.6 times F24 estimates,” he said.
Mr. Lejuez was one of several equity analysts on the Street to raise their forecast for Lululemon following the better-than-anticipated quarterly report.
Earnings per share for the quarter came in at US$4.40, topping the consensus forecast of US$4.26 as well as the company’s own guidance of US$4.22 between US$4.27. Total sales rose 30 per cent year-over-year, ahead the Street’s estimate of 27 per cent as comparable same-store sales also topped projections (27 per cent versus 24 per cent). Margins were also better than anticipated.
For its first quarter of the current fiscal year, Lululemon now expects EPS of US$1.93-US$2, well ahead of analysts’ previous expectations (US$1.64) as sales and margins continue to outpace estimates.
Mr. Lejuez said: “Incremental info from conference call and management call back: (1) Once LULU transitioned out of holiday and brought in spring merchandise, they saw trends accelerate and markdowns normalize; (2) Merch margins were better than expected in 4Q driven by lower than expected markdowns post-holiday; (3) No big differences in quarterly SG&A growth in F23; (4) With GM tailwinds, management has opportunity to invest behind key growth drivers in F23, including market expansion, DC buildouts, etc; (5) China grew 30 per cent in F22 and 30 per cent in 4Q, and growth has accelerated so far in 1Q quarter-to-date as the China economy has reopened; (6) Above algo sales growth in 1Q is being driven by broad based strength across regions; (7) Int’l store growth will normalize in the 30-35 range in F23 (vs 49 stores in F22 and 43 stores in F21) as management opened int’l stores at a faster pace in F21/F22 (particularly in Greater China to take advantage of attractive store opportunities).”
With the release, Mr. Lejuez raised his full-year 2023 and 2024 EPS estimates to US$12.05 and US$14.47, respectively, from US$11.22 and US$13.38 “based on stronger sales/GM and higher shares repos (estimated $800-million vs guidance for no share repos).”
That view led him to raise his target for Lululemon to US$440 from US$350. The average target on the Street among analysts covering the stock is US$385.75, according to Refinitiv data..
“While shares are up almost 13 per cent in pre-market trading, LULU’s EV/EBITDA multiple sits at 14.7 times F23E EV/EBITDA multiple, still well below NKE at 18.6 times F24E EV/EBITDA,” he said. “Given LULU’s long runway for global growth as it expands in new categories (footwear, golf, tennis) and regions (China/Europe), we believe LULU’s multiple should expand toward NKE’s over time.”
Elsewhere, others making changes include:
* Credit Suisse’s Michael Binetti to US$420 from US$410 with an “outperform” rating.
“We couldn’t ask for much more to stabilize the LULU stock narrative. FY23 rev guide of 15-16 per cent year-over-year is at/above LULU’s 15-per-cent CAGR and EPS is guided well above Street (guide is $11.50-$11.72, Street is $11.27)—meeting LULU’s reassurances from early Jan that ‘23 would be an on-algo year,” said Mr. Binetti. “With inventories moving in the right direction, LULU was able to confidently guide to 2023 promotional levels returning to historical average (significantly de-risking EPS, in our view). Sales guidance looks very conservative (considering LULU delivered 30-per-cent revenue growth in 4Q with China largely closed, and guided to 17-20 per cent in 1Q with China re-opening). And with China representing only 8 per cent of sales today but 15 per cent of global store count, we think LULU China will be one of the marquee stories in all of Softlines retail in 2023.”
* KeyBanc’s Noah Zatzkin to US$390 from US$375 with an “overweight” rating.
“Results + guidance (ahead of the pre-release Street view) reinforce our view that brand strength and product newness, coupled with a broader shift toward the casualization of apparel, are enabling LULU to navigate a challenging environment better than most peers,” he said. “LULU remains one of our key ideas for 2023, and long term, we see meaningful opportunity via product innovation/launches and international growth.”
* Wedbush’s Tom Nikic to US$415 from US$380 with an “outperform” rating.
“With inventories and gross margin moving in the right direction, we believe the biggest overhang to the stock has been alleviated,” he said. “Furthermore, the strong Q1 guide shows that momentum remains high, and the FY guidance assumes moderating sales/margin growth for the balance of the year (leaving room for numbers to move higher as the year progresses). With the alleviation of the gross margin/inventory overhang, we raise our price target.”
* BMO’s Simeon Siegel to US$340 from US$304 with a “market perform” rating.
“After growing concerns, the better-than-expected result should take shares higher with questions remaining around the go-forward process of clearing inventory and long-term margins,” he said.
* Jefferies’ Randal Konik to US$225 from US$200 with an “underperform” rating.
“We still see areas of concern for the firm including the sustainability of accessories growth and slowing growth in men’s. Additionally, the sales growth in China was underwhelming and although inventory growth moderated in the Q, we believe levels are still high and not in line with 2H sales growth. We raise our estimates, but remain below consensus,” said Mr. Konik.
* Barclays’ Adrienne Yih to US$413 from US$368 with an “overweight” rating.
* Bernstein’s Aneesha Sherman to US$320 from US$290 with an “underperform” rating.
* Piper Sandler’s Abbie Zvejnieks to US$390 from US$385 with an “overweight” rating..
* TD Cowen’s John Kernan to US$500 from US$470 with an “outperform” rating.
* BoA Global Research’s Lorraine Hutchinson to US$410 from US$380 with a “buy” rating.
* Stifel’s Jim Duffy to US$460 from US$450 with a “buy” rating.
* Guggenheim’s Robert Drbul to US$440 from US$400 with a “buy” rating.
National Bank Financial analyst Travis Wood sees Crescent Point Energy Corp.’s (CPG-T) $1.7-billion acquisition of Spartan Delta Corp.’s (SDE-T) Montney oil field assets in Alberta as “a positive development,” seeing “medium-term development potential, backstopped by attractive inventory which complements the existing Kaybob Duvernay portfolio.”
Shares of Calgary-based Crescent Point slid 0.6 per cent on Tuesday following the premarket announcement of the all-cash deal, which will see it add 38,000 barrels of oil equivalent a day to its production capacity.
“Although some may feel this was a strategic pivot given last week’s update, we believe the Montney only further enhances the company’s inventory position with 600 short-cycle, high-impact, and high-return locations.” said Mr. Wood. “[Moreover, while being immediately accretive to most corporate metrics (cash deal), the Montney assets are complementary through operational efficiencies and knowledge transfer due to similar reservoir characteristics in the volatile oil fairway. The transaction provides Crescent Point with the flexibility to grow corporate production to 195 mboe/d [thousand barrels of oil equivalent per day] by 2027 (an increase of 43 mboe/d from its previous outlook) with 60 per cent of production represented by the Duvernay and Montney. We expect returns will be enhanced over time as the company works to leverage efficiencies, reduce costs and capture infrastructure optimization across the volatile oil region.”
The analyst thinks transaction provides Crescent Point with the flexibility to boost its corporate production to 195,000 boe/d by 2027, which is an increase of almost 43,000 boe/d from its previous outlook. Almost 60 per cent of total production will now come from the Duvernay and Montney.
“We expect returns will be enhanced over time as the company works to leverage efficiencies, reduce costs and capture infrastructure optimization across the volatile oil region,” he added.
Reiterating an “outperform” recommendation for Crescent Point shares, Mr. Wood raised his target to $16 from $14.50 “driven by an increase to our cash flow forecast and 2023 estimated EV/DACF [enterprise value to debt-adjusted cash flow] multiple (to 4.0 times from 3.5 times), reflecting less inventory and operational risk across the asset base.” The average on the Street is $14.17.
Elsewhere, others making changes include:
* Raymond James’ Jeremy McCrea to $12.50 from $12 with an “outperform” rating.
“One of the key attributes to successful investing is to recognize pivotal moments within businesses,” said Mr. McCrea. “For E&P companies, that typically involves a new play or improved field economics that ultimately gets reflected in a multiple expansion more near-term. When Crescent Point bought into the Duvernay in 2021, and now the Montney today, the plays have the potential to meaningfully change the profitability of CPG going forward. The mixed history of corporate leverage and inventory economics however create a unique opportunity for investors. The company trades at a discounted valuation because of its past, but with greatly improved Duvernay potential and now Montney upside, this week marks a key turning point for the company. This transaction extends CPG’s premium inventory to 15+ years, forms a more defensive and diversified asset portfolio, and is accretive to future excess free cash flow. Ultimately, Crescent Point is a better company today.”
* Stifel’s Cody Kwong to $15.75 from $15.50 with a “buy” rating.
“The acquisition will expand CPG’s premier drilling inventory to 15 years which we expect to dramatically improve perception of its long term returns focused sustainability, which has weighed on its valuation in the past. Between the recent Duvernay update and this acquisition, we believe it will be hard to ignore the meaningful improvements the company has made over the past couple of years. In our view, this newfound appreciate will come with a deserving valuation re-rating, as we increase our target price to $15.75 per share, and highlight CPG as differentiated rate of change story in 2023,” said Mr. Kwong.
* BMO’s Randy Ollenberger to $12.50 from $11 with an “outperform” rating.
“Although the transaction will result in higher leverage, we see it as being highly accretive on a cash flow and free cash flow basis. Crescent Point has kept its shareholder return framework intact, which we expect will result in improved returns given the more robust free cash flow outlook,” he said.
Calling it “another successful conquest,” Desjardins Securities analyst Chris MacCulloch thinks Spartan Delta Corp.’s (SDE-T) is continuing to deliver shareholder value with the Crescent Point deal.
“Last fall, SDE outlined plans to revaluate the corporate asset base through a strategic repositioning process,” he said. “With [Tuesday’s] disposition and spinco announcement, the company retained its highly opportunistic stance by capitalizing on another counter-cyclical window of opportunity, having now completed 12 transactions since inception in late 2019. Since then, SDE has raised $537-million of equity at an average price of $3.16 per share, which implies more than 300-per-cent cash return in less than three years when factoring in the previously distributed 50 cents per share special dividend (paid in January) and yesterday’s announcement of a $9.50 per share sale dividend and a 10-cents-per share special dividend. And that is excluding residual value for SDE and Logan Energy!
“The Alberta Montney disposition, which is expected to close in May, includes 377 (362 net) sections of land at Gold Creek East, Gold Creek West and Karr. The assets were recently producing 33,200 boe/d (56-per-cent oil & liquids) and include all associated facilities and gathering systems. Notably, the disposition also comprised all tax pools associated with the Gold Creek and Karr lands, although SDE still expects to remain tax-free until late 2024 or early 2025 based on current prices. More importantly, the transaction was completed at a favourable cash flow multiple of 3.5 times, which is consistent with other recent Montney asset sales despite recent commodity price softness amid a global banking crisis.”
Reiterating a “buy” rating for Spartan shares, Mr. MacCulloch cut his target to $19.50 from $22.50 to “reflect reduced upside within the context of our bullish 2024 oil price deck.”
“In our view, management has done an admirable job crystallizing value, the lion’s share of which will be returned to shareholders via special dividends. We also like the improved corporate focus provided by the spinout of high-growth Montney assets into Logan Energy,” he added.
Elsewhere, TD Securities’ Aaron Bilkoski downgraded Spartan Delta to “hold” from “buy” with a $6.50 target, dropping from $20.
Others making target changes include:
* Scotia Capital’s Cameron Bean to $21 from $23 with a “sector outperform” rating.
“We view SDE’s asset sale and spin-out transactions as a positive for the company’s shareholders,” said Mr. Bean. “1) The Montney asset sale captured a sizable chunk of the full SOA value we ascribed to the assets (despite a deteriorating macro environment and weakening commodity prices) – and that value will flow directly to SDE shareholders as cash , 2) the Deep Basin focused SDE looks to be a free cash flow machine poised to return more cash to shareholders (dividend estimates TBD). 3) The spinco (Logan Energy Corp. or “Logan”) offers exposure to intriguing Montney growth assets. We have made preliminary updates to our full suite of SDE estimates and created a preliminary stub model for Logan. Adding all the pieces back together shifts our Target Price to $21 per share (down slightly with all the moving pieces). Importantly, if we assume $9.00 per share PV for the special dividends (rough estimate for risk and time value of money), SDE’s current share price shrinks to $5.78 per share for the continuing Deep Basin focused company (2.7 times our 2024 DACF estimate on strip or 12.1-per-cent FCF estimated yield) and an essentially free option on Logan (we estimate a 93 cents per share 10-year NAV). Overall, we see this as a positive outcome and remain bullish on the stock.”
* Raymond James’ Jeremy McCrea to $19 from $18 with an “outperform” rating.
“Spartan has been one of the most aggressive acquirers in the CDN E&P space over the last couple of years, which led to building one of the largest undrilled Montney positions for a mid-cap company,” he said. “[Tuesday] SDE announced the successful conclusion of its repositioning plans through the sale of its core Montney assets to Crescent Point Energy for $1.7 bln and a spin-out of its growth-focused Montney assets to Logan Energy (a newly formed entity) - of which proceeds will be returned to shareholders. Going forward, Spartan is still a 40,000 boe/d company, with highly economic conventional Spirit River assets. With limited infrastructure spending required, the company should generate higher excess free cash flow, which ultimately should lead to a premium dividend yield. Although new guidance and some other details have yet to be released (and why we think share price was only up 7 per cent), management is doing what they have always done, and that’s creating value for shareholders. We suspect Logan should see a premium valuation when it becomes tradable which provides more upside than what’s reflected in the stock today.”
* Stifel’s Cody Kwong to $18 from $20 with a “buy” rating.
“We believe the share price could have immediate upside potential to $15.00-$15.50 per share (at strip), while our 12-month view frames a new target price of $18.00 per share,” said Mr. Kwong.
The federal government’s plan in its 2023 budget to lower the criminal rate of interest from the equivalent of 47 per cent APR to 35 per cent should be view as “a negative” for the business model of Goeasy Ltd. (GSY-T), according to Raymond James analyst Stephen Boland.
“This change was a surprise to management,” he said. “The Federal government did start consultations with the industry in 2021 but did not make the submissions public and according to management did not provide meaningful followup. This is rare in financial services (even among non-OSFI regulated segments).”
While he downgraded his recommendation for the Mississauga-based alternative financial services company to “outperform” from “strong buy,” he said the changes revealed on Tuesday “may not be as material as many expect.”
“GSY has been on a multi-year journey to lower their customer rates,” said Mr. Boland. “Only 36 per cent of their loan book has loans above the 35-per-cent threshold. The average rate on that portion is 42.5 per cent. This would reside in the unsecured consumer book. Management still expects earnings growth and a 20-pr-cent-plus ROE. The degree of growth may change, and we expect new guidance within the next few months. Part of the growth is assuming rates would be lowered on a prospective basis (offering lower rates upon renewal). The term of the higher rate products is over two years.
“We have followed sub-prime lenders for many years in consumer loans, mortgages, and auto. It is a necessary credit class. But if lenders cannot make a meaningful return, the highest risk customers are going to have limited access to credit. This is due to the higher charge-off rates and required provisions. We have seen this in the other lending sectors. This government change may lower competition for GSY and reduce choices for consumers.”
Pointing to “uncertainty regarding future guidance,” he cut his target for Goeasy shares to $136 from $195. The current average is $183.89.
“Management intends to issue a press release before market open. We would be buyers on weakness. Management knows their business very well and this merely accelerates their strategy,” said Mr. Boland.
Others making changes include:
* Scotia Capital’s Phil Hardie to $130 from $170 with a “sector perform” rating.
“goeasy stock sold off at an accelerated pace prior to the release of the 2023 Budget as media outlets began to report expectations that the government is intending to reduce the rate of interest under the Criminal Code to 35 per cent from 47 per cent (APR),” said Mr. Hardie. “The release of the Budget confirmed this move, along with plans for a new round of consultations to consider a further reduction.
“This is an unexpected negative development but we believe it is ultimately manageable as the company accelerates its current strategy of diversifying its product offerings and moving up the credit spectrum. The change is likely to have an adverse impact on the borrowers and the broader industry as smaller players and those active in the higher yield segments are likely to retreat and exit. That said, this could represent an opportunity for goeasy to partially offset some of the impact of the cap through potentially greater pricing power and market share gains. We expect earnings growth to continue but at a slower pace than initially expected.”
* Desjardins Securities’ Gary Ho to $165 from $190 with a “buy” rating.
“Our investment thesis is predicated on: (1) its ability to manage in the current challenging macro environment through its robust credit underwriting platform, supported by its creditor insurance program; (2) solid loan book growth, particularly on secured products; (3) credible management team; and (4) the business has consistently generated a mid-20-per-cent ROE,” said Mr. Ho.
* BMO’s Etienne Ricard to $140 from $196 with an “outperform” rating.
* Cormark Securities’ Jeff Fenwick to $140 from $185 with a “buy” rating.
Also pointing to the impact from the change to the criminal rate of interest, Raymond James analyst Steven Li moved Mogo Inc. (MOGO-T) to an “under review” designation from his previous “outperform” recommendation.
“While this still has to work its way through legislation, we believe it could have a material impact on MOGO’s loan products,” he said. “MOGO’s recent 4Q22 conference call says its average loan size is just over $1,000 which leads us to infer a sizeable portion, if not the majority, of its loan portfolio could be carrying more than 35-per-cent interest rate. Loan interest revenues represented 40 per cent of 4Q22 revenues and expected to represent 40 per cent of our F2023 revenues.”
Mr. Li removed a target for Mogo shares. It was previously $1.50, which was below the $2.25 average.
After Dominion Lending Centres Inc. (DLCG-T) suffered a “tough end to the year,” Desjardins Securities analyst Gary Ho stressed “share price weakness could incentivize a privatization scenario, which could surface value.”
The Vancouver-based mortgage company reported core business earnings before interest, taxes, depreciation and amortization (EBITDA) of $3.7-million for its fourth quarter after the bell on Tuesday, missing both Mr. Ho’s $6.7-million esimate and the consensus forecast of $7.7-million due to several unquantified one-time items. That led to an EBITDA margin of 26.6 per cent, down from 55.6 per cent a year ago and also below the analyst’s projection of 44 per cent.
“We were also surprised by the decline in broker count and Velocity penetration,” said Mr. Ho.
Citing a “softer housing outlook,” he reduced his funded mortgage volume projection for the first quarter and full-year 2023, projecting year-over-year declines of 34 per cent and 17.1 per cent, respectively.
“We expect the steepest year-over-year mortgage volume drop in 1H23 before a pickup in 2H23,” he said.
With reductions to his 2023 and 2024 revenue and earnings estimates, Mr. Ho trimmed his target for Dominion Lending shares to $3.50 from $4, keeping a “hold” rating. The average is currently $4.25.
“Our investment thesis is predicated on: (1) reduced housing activity and lower home prices will lead to tough comps, at least in 1H23, slightly offset by reflagging; (2) EBITDA margin pressure from a lower top line; and (3) we continue to monitor the Finastra-to-Newton transition,” he concluded.
Energy analysts at Canaccord Genuity think recent global banking turmoil have overshadowed a “constructive Chinese demand backdrop.”
“High-profile bank failures in the U.S. and Europe have shaken the global financial markets as governments and central banks scramble to contain collateral damage,” they said. “This has triggered significant volatility in many risk assets, with WTI recently falling to US$65 per barrel (a level last seen in late 2021). Not surprisingly, this has also shifted investor focus further away from global oil supply and demand fundamentals toward U.S. Fed policy decisions. We also believe the recent statement by the US Energy Secretary, stating that refilling the SPR would be challenging despite the decline in oil prices, may create further headwinds for the commodity in the near to medium term.
“Against this backdrop, OPEC and the IEA expect a surge in Chinese demand to lift the global oil market from surplus to deficit later this year. The IEA also believes this will be accompanied by a continued recovery in global air traffic, taking average world oil demand to a record 102 million barrels per day in 2023 (up 2 per cent year-over-year). The IEA also expects countries outside of OPEC+ to drive average global production growth of 1.6 million bbl/d this year. Even with Russia’s 500,000 bbl/d production cut in March, the IEA believes global oil supply should comfortably exceed demand in H1/23. However, this agency expects a decline in non-OPEC+ production growth in H2/23 just as seasonal tailwinds and a Chinese recovery boost global oil demand. Nonetheless, we believe any further deterioration in global credit markets (and its potential impact on global oil demand) likely represents the most significant risk to a tightening crude market thesis later this year.”
In a research report released Wednesday, the firm lowered its price forecasts for both oil and natural gas for 2023 and 2024. Its WTI projections for 2023 slid to US$70 per barrel from US$80 and 2024 to US$70 from US$745.
Those changes led the analysts to cut their cash flow assumptions for companies in their coverage universe by an average of 19 per cent this year and 12 per cent in 2024. That led to a series of target price reductions from stocks in the sector.
Analyst John Bereznicki did upgraded Precision Drilling Corp. (PD-T) to “buy” from “hold,” seeing value following a 35-per-cent pullback in price year-to-date. His target fell to $90 from $100. The average is $142.13.
The analysts’ target changes include:
- AltaGas Ltd. (ALA-T, “buy”) to $28 from $30. The average is $31.33.
- Birchcliff Energy Ltd. (BIR-T, “buy”) to $10.50 from $12. Average: $11.27.
- Freehold Royalties Ltd. (FRU-T, “buy”) to $20.75 from $21. Average: $20.25.
- Gibson Energy Inc. (GEI-T, “hold) to $24 from $26. Average: $25.47.
- Keyera Corp. (KEY-T, “buy”) to $34 from $36. Average: $34.64.
- Pembina Pipeline Corp. (PPL-T, “buy”) to $53 from $55. Average: $52.33.
- PrairieSky Royalty Ltd. (PSK-T, “hold”) to $23.75 from $24. Average: $25.67.
- Surge Energy Inc. (SGY-T, “buy”) to $13.75 from $14.75. Average: $13.86.
- Topaz Energy Corp. (TPZ-T, “buy”) to $27.50 from $28. Average: $28.23.
- Total Energy Services Inc. (TOT-T, “buy”) to $12.50 from $16. Average: $15.83.
- Whitecap Resources Inc. (WCP-T, “buy”) to $14.50 from $15. Average: $14.41.
In other analyst actions:
* Credit Suisse’s Andrew Kuske upgraded Enbridge Inc. (ENB-T) to “neutral” from “underperform” with a $53 target. The average is $58.40.
“For the year-to-date, Enbridge Inc.’s (ENB) shares delivered a negative 5-per-cent return versus the S&P/TSX Composite’s 1.2 per cent and the Alerian’s AMNA performance of negative 3.5 per cent,” said Mr. Kuske. “With that share price performance and the now sufficient excess return potential to our unchanged $53 target price, we upgrade ENB’s shares to Neutral from the prior Underperform rating. With ENB’s recent activities (e.g. the Q4 2022 results print and the Investor Day), generally, we believe some of the issues surrounding specific Mainline issues (among other things) are better understood along with being more effectively reflected in the share price versus the prior rating action. In the quarters ahead (potentially a summertime event), we anticipate some of the noise in relation to the current ENB Mainline evolution to be resolved as witnessed in past cycles – albeit with a balancing of risks/rewards. Yet, that dynamic looks to be appreciated at this stage in time, in our view.”
* TD Securities’ Aaron Bilkoski downgraded Birchcliff Energy Ltd. (BIR-T) to “hold” from “buy” with an $8 target, down from $9 and below the $11.27 average.
* In a research report titled Enterprises have 99 problems, but AI-powered search doesn’t have to be one, Stifel’s Suthan Sukumar initiated coverage of Coveo Solutions Inc. (CVO-T) with a “buy” rating and $12. target, seeing “near-term headwinds but its long-term secular growth picture intact” and looking for more than 20-per-cent organic CAGR over near-to-mid term. The average target is $11.18.
“Coveo is a disruptive, market-leading platform for next-gen, AI-based search that is bringing enhanced digital experiences with better relevance, recommendations, and personalization from the likes of tech heavyweights (Amazon, Netflix, etc.) to the masses in the enterprise, and outperforming Street expectations while doing it (since their 2021 IPO),” said Mr. Sukumar. “While macro-headwinds weigh on growth near-term, we believe a large, underpenetrated TAM [total addressable market] coupled with rising market awareness/interest in AI will continue to fuel an outlook for strong demand, particularly for Coveo’s highest ROI solutions in commerce and customer service, allowing the company to gain continued market-share alongside growing wallet-share with existing customers, and sustain a more than 20-per-cent CAGR with an accelerated timeline to profitability. We view the current share price as an attractive entry-point into this pure-play AI story, and see opportunity for a re-rate in valuation as the company delivers on growth and improving profitability.”
* UBS’ Jay Sole cut his Canada Goose Holdings Inc. (GOOS-N, GOOS-T) target to US$20, matching the average, from US$23 with a “neutral” rating.
* After “mixed” fourth-quarter results, Canaccord Genuity’s Derek Dley cut his Charlotte’s Web Holdings Inc. (CWEB-T) target to $1 from $2 with a “buy” rating. The average is
“We have revised our multiple to reflect the ongoing multiple compression in the peer group as well as our revised near-to-medium term growth expectations against the backdrop of a softer consumer spending environment,” he said.
“We assign a premium valuation to Charlotte’s Web partly to reflect the potential upside from the sale of CBD ingestibles in the FDM channel, which we currently do not include in our estimates. We believe Charlotte’s Web represents the most attractive investment in the growing CBD space. The company boasts an industry-leading brand along with a large network of retail partners.”
* CIBC World Markets’ Bryce Adams raised his Ero Copper Corp. (ERO-T) target to $23.50, below the $25.11 average, from $20 with a “neutral” rating.