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

RBC Capital Markets downgraded Franco-Nevada Corp. (FNV-T), saying the stock is fairly valued right now compared to peers.

Analyst Stephen Walker downgraded the miner to “sector perform” from “outperform” and kept his $117 price target. The median price target is $115.36, according to Zack’s Investment Research.

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“Franco-Nevada shares appear fairly valued relative to royalty and streaming peers on multiple metrics, and the market appears to be pricing in some of the revenue growth from Cobre Panama. Franco-Nevada provides investors with low-risk precious metals exposure with growing mining and oil and gas revenues, and is well positioned for future precious metals acquisitions,” he said.

“FNV is trading at 2.5 time price to net asset value (P/NAV) and 22 time three-year forward average enterprise value to earnings before interest, taxes, depreciation and amortization (EV/EBITDA), above the average of 2.2 times and 17.5 times for large-cap mining royalty and streaming companies (Royal Gold Inc.) RGLD and (Wheaton Precious Metals Corp.) WPM, and broadly in line with historical trading patterns. Our estimated three-year free-cash-flow FCF yield of 3.5 per cent for FNV is below the average of 4.8 per cent for RGLD and WPM, while our three-year gold-equivalent production (compound annual growth rate) CAGR of 10.6 per cent is above those peers at 2.4 per cent. The implied 16 per cent all-in return to our FNV price target compares to the average implied return of 28 per cent for other mining royalty and streaming companies under coverage. As a result, we believe FNV is fairly valued at current levels, which supports our revised rating of Sector Perform,” he said.

“We have updated our model following Q1/19 results and have made modest tweaks to our forecasts. Our price target remains $117 at US$1,300/oz gold and is based on multiples of 2.75 times P/NAV at 7 per cent and 25 times EV/three-year forward average EBITDA,” he said.


Citi has cut its price target on Tesla Inc. (TSLA-Q) amid lingering demand concerns and recent retail price cuts to its Model S/X.

Analyst Itay Michaeli kept his sell rating on the stock and cut his price target to US$191 from US$238 “as the risk/reward still appears negatively skewed despite the recent capital raise and stock pullback, mainly on lingering demand/FCF [free cash flow] concerns (May 16th reported cost-cutting memo, Model S/X price cuts, China risks).” The median price target is US$249.

“The recent capital raise was a positive step but won’t necessarily get the balance sheet out of the woods if Tesla cannot achieve FCF targets. So the recent reported internal memo, which seemingly called into question prior guidance, didn’t help the risk/reward calculus. The implications can be serious, since an automaker’s balance sheet is always subject to the confidence “spiral” risk. Good or bad, we think it’s important for the company to provide a more formal guidance update sooner than later. In the meantime, we’ll look at our Model 3/Y tracker and future product/FSD [full self-driving] rollouts for clearer demand signals in an important Q2,” the analyst said.

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Echelon Wealth Partners said the selloff of Tucows Inc. (TC-T) since it reported its first quarter results is overdone.

Tucows’ earnings and revenue fell short of expectations, posting earning per share of 26 cents US, short of analyst expectations of 30 cents US.

“The miss was entirely attributable to the Network Access division (particularly Ting Mobile) which generated US$23.3-million in revenue versus our US$26.4-million expectations. It should be noted that TC experienced its worst quarter of carrier penalties ever at Ting Mobile coupled with a rare decrease in data usage per account,” Echelon said.

Echelon boosted its rating on the stock to “buy” from “hold” and maintained its price target of $125.

“We continue to believe the next major growth catalyst for TC lies in its fibre business. Today’s 7,700 fibre customers add roughly US$7.7-million in run-rate gross profit. We believe we could see fibre customers and homes passed of approximately 10,000-15,000 and 40,000-50,000, respectively, by 2019-end, which would yield US$10-15-million in incremental annual run-rate gross profit. For context, fibre customers and homes passed ended 2017 and 2018 at 4.5K/16.0K and 7.0K/28.1K, respectively, showing impressive early stage growth. We believe TC will continue to add strategic Ting towns that fit its profile and grow the addressable opportunity and resulting visibility in its next growth leg of fibre internet access to the home.”

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Desjardins revised its estimates for Canadian Apartment Properties Real Estate Investment Trust (CAR-UN-T) after a flurry of activity at the company.

“It’s been a head-spinning 2019 for CAR, characterized by (1) more than $600-million of equity issuance, (2) more than $500-million of acquisitions, (3) the creation of ERES, and (4) the appointment of Mark Kenney to CEO. With operating tailwinds at its back and an attractive cost of equity capital, CAR is taking decisive action to drive future value for investors. Estimate revisions reflect its first quarter 2019 results and other tweaks,” said analyst Michael Markidis.

He kept his $51 price target and his “hold” rating.

He revised his funds from operations per unit (FFO) estimates for fiscal 2019 to $2.15 from $2.13, and for 2020 to $2.38 from $2.36. He reduced his adjusted funds from operations (AFFO) estimates for 2019 to $1.74 from $1.78 and for 2020 to $1.98 from $2.01.

“CAR trades at 25.7 times EBITDA and a 10 per cent premium to our spot NAV. We continue to base our $51 target on a 10–15 per cent NAV premium and it equates to ~21.5 times our 2020E FFO,” he said.

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Credit Suisse raised its price target on TJX Cos Inc. (TJX-N) after it reported better-than-expected first quarter earnings.

Its earnings per share of 57 cents US beat analyst Michael Binetti’s 54 cent target, which was driven by strong same store sales. While comparable sales in HG and Canada were disappointing, international sales rose more than 8 per cent which “was the strongest in years,” he said.

TJX said its inventory was up 16 per cent year over year “as brands accelerated orders to beat the first round of tariffs” between China and the U.S. TJX also said it was rising prices gradually in anticipation of the tariffs.

“While broad consumer inflation will be a significant negative in discretionary categories like softlines, we think TJX has multiple paths to be a relative, and possibly absolute EPS acceleration story with the P&L better calibrated for rising COGS. If not, TJX’s shareholder base has historically been willing to accept margin pressure if TJX can show visible share gains that it can monetize later. Competitors don’t have the same luxury,” the analyst said.

He raised its 2020 earnings per share to US$2.64 from US$2.62 based on strong same store sales.

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He kept his neutral rating on the stock but raised his target price to US$56 from US$55. The median is US$58.


In other analyst actions:

Osisko Gold Royalties Ltd: Canaccord Genuity cuts target price to C$17 from C$17.50

Premium Brands Holdings Corp: TD Securities raises target price to C$96 from C$93

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