Inside the Market’s roundup of some of today’s key analyst actions
MTY Food Group Inc.‘s (MTY-T) second-quarter results illustrated how the company benefited from taking very quick actions at the onset of the COVID-19 pandemic, said Michael Glen, analyst with Raymond James.
“Such actions included significant cuts at the corporate level (with $10 mln in the current expense reductions considered temporary in nature), exceptionally strong working capital management (which included a 40% royalty abatements to franchisees on royalty payments)....and renegotiation of the company’s credit facility to incorporate more lenient covenants. These actions were coupled with a strong performance from the Papa Murphy’s franchise, which was indicated to have contributed 50% of the company’s EBITDA in 2Q,” Mr. Glen said in a note.
Mr. Glen noted that the tone of MTY’s earnings conference call conveyed a “cautious optimism,” with 92% of its network now open - up from 80% at the end of the second quarter.
He raised his price target on the stock to $30 from $26 and reiterated a “market perform” rating.
Elsewhere, Acumen Capital raised its price target to $40 from $36 and maintained a “buy” rating. TD Securities raised its target to $28 from $24. National Bank raised its target to $32 from $29. And RBC raised its target to $27 from $22.
The median price target is now $29, according to Refinitiv Eikon.
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Desjardins Securities analyst David Newman upgraded Pinnacle Renewable Energy Inc. (PL-T) to a “buy” rating from a “hold”, citing stability in demand for its products, improving supply and processing picture, and recent favourable amendments to its credit facility. However, he trimmed his price target to $7 from $7.50, based on tweaks he made to his valuation metrics.
“PL has effectively worked through the high-cost, coarse feedstock from late 2019 and continues to build its strategic inventories of higher-quality fibre, which should reduce its future reliance on third-party pellets. Further, we are cautiously optimistic that lumber demand could be sustained by DIY/home improvement projects, resilient housing demand and China’s recovering economy, which should ensure a growing supply of sawmill residuals, aided by a reduction in stumpage fees. While 2Q could be a transitional quarter, conditions have progressively improved heading into the summer, with the company poised to begin monetizing its C$6.9b backlog,” Mr. Newman said in a note.
The median analyst price target is $7.
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Shaw Communications Inc. (SJR-B-T) reported “strong” results after the bell on Friday, as the company’s operations were less affected by the pandemic than expected, commented Maher Yaghi of Desjardins Securities. But he cautioned he did not expect Shaw to maintain this level of profitability when the economy returns to more normal levels.
For the quarter, consolidated revenue was $1.31-billion, down 0.8% year over year but above consensus of $1.26-billion. Consolidated adjusted EBITDA was $609-million, beating consensus of $579-million. The full impact of COVID-19 was not reflected in the quarter given many clients suspended services well into the period covered by the earnings report. Meanwhile, continued government stimulus likely supported the business in the quarter, meaning that not all risk is behind the company despite the strong operational performance,” Mr. Yaghi commented.
“We believe SJR’s operations should fare relatively well during the pandemic,” the analyst concluded. “While the overall impact should be negative due to macroeconomic trends, the company should still benefit from the offset of a lower wireless cost of acquisition and a higher proportion of self-installs on wireline. Post COVID-19, we believe the company’s wireless offering should support decent consolidated growth.”
Mr. Yagha raised his price target to C$28 from $27 and maintained a “buy” rating.
Elsewhere, TD Securities raised its price target to $32 from $31, Scotiabank raised its target to $31.50 from $30.50, and RBC raised its target to $25 from $24.
The median price target is now $27.
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Jefferies initiated biotech company Moderna Inc. (MRNA-Q) as a “buy”, believing its vaccine for the coronavirus will be a success. It set a “base case” price target of US$90.
“We believe the Street will be surprised to the upside if the COVID-19 vaccine works, gets approved by early 2021, and there are multi-billion dollars of purchase orders from USA and around the world,” a note from Jefferies said.
“We believe the vaccine will get approved and could do $5-billion plus in orders over the next few years and the stock will head higher.”
The median price target is US$92.
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BMO Capital Markets analyst Matt Borsch downgraded U.S. hospital operator HCA Holdings Inc. (HCA-N) to “market perform” from “outperform,” citing his view “of a build-up of risks not adequately offset by valuation...”
He cited three specific factors driving the decision, including that pandemic-induced avoidance of healthcare systems may persist for longer than expected, the overall acceleration of long-term trends away from hospital-based settings, and the potential impact of price transparency with a key U.S. government administration rule set to take effect Jan. 1, 2021.
Mr. Borsch lowered his price target on HCA stock to US$100 from $121.
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Industrial Alliance Securities analyst Chelsea Stellick upgraded LexaGene Holdings Inc. (LXG-X) to “buy” from “speculative buy” after the company Monday unveiled its commercial product, MiQLab, that tests for SARS-CoV-2.
“After incorporating feedback from beta testing, LXG has announced the name and first look of its flagship product, the MiQLab™. The instrument is currently being manufactured and anticipated for commercial launch prior to the end of September 2020,” Ms. Stellick said. She said the “milestone achievement,” which involves a commercial date and manufacturing plans, increases her valuation of the stock.
She raised her price target to $1.70 from $1.05. The median target is $1.61.
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In other analyst actions:
Stifel raised its price target on Aphria Inc. to $8 from $5.30 and upgraded its rating to “buy” from “hold.”
Goldman Sachs initiated coverage on Disney with a “buy” rating and US$137 price target.
Morgan Stanley raised its price target on Apple to US$419 from $340, while Wedbush hiked its target to $450 from $425.
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Darcy Keith
Roma Luciw