Inside the Market’s roundup of some of today’s key analyst actions
Scotiabank analyst Robert Hope upgraded TC Energy Corp (TRP-T) to a “sector outperform”rating, believing recent share price underperformance presents an attractive entry point for the stock. He maintained a C$72 price target.
“After sizable underperformance over the last few months, we are upgrading TC Energy, which we view to be among the highest-quality pipeline/midstream stocks. Our Sector Outperform thesis is based on our view that its resilient and low-risk business model is well positioned to grow longer term and that recent share price underperformance presents an attractive entry point. We see little value in the shares for Keystone XL, which provides additional upside (though our upgrade is not dependent on the project proceeding),” Mr. Hope said in a research note.
“We see TC Energy as being one of the lowest-risk stocks in the energy sector, which has been demonstrated through the downturn as its businesses have performed well. But, TC Energy was the worst-performing stock in our coverage universe in Q2/20 as well as since May 1 (post the initial share price recovery following March lows). We attribute this to funds flows out of the lower-beta names such as TRP into more torquey, commodity-centric names (including the midstreamers). While commodity prices have recovered, we note that drilling activity remains very muted, and in Alberta, oil and gas rig activity is down ~85% and ~60% y/y, respectively. As such, we think we could see investors gravitate toward the lower-risk and more geographically diversified pipelines (ENB, TRP) versus the midstreamers,” he added.
The median analyst price target on TC Energy is $71.50, according to Refinitiv Eikon.
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Raymond James has increased its price assumptions for crude oil for 2020 and 2021 to account for recent moves in forward futures prices, while also trimming its assumptions for natural gas pricing. As a result, a number of rating changes were made to intermediate oil and gas stocks that it covers.
For 2020, it is now assuming West Texas Intermediate pricing of of US$38.56/bbl versus US $33.25/bbl prior. For 2021, it is now assuming US$41.38/bbl versus US$35.57/bbl prior. In the long term, it now assumes pricing of US$50.00/bbl versus US$45.00/bbl previously.
Birchcliff Energy (BIR-T) was upgraded to “outperform” from “market perform” and the price target was raised to $2 from $1.50.
Freehold Royalties (FRU-T) was upgraded to “outperform” from “market perform” with the price target rising to $5.50 from $5.
Kelt Exploration (KEL-T) was upgraded to “outperform” from “market perform” with the price target rising to $3 from $2.25.
NuVista Energy (NVA-T) was upgraded to “outperform” from “market perform” with the price target rising to $1.25 from 75 cents.
TORC Oil & Gas (TOG-T) was upgraded to “outperform” from “market perform” with the price target rising to $2 from $1.
Crescent Point Energy (CPG-T) was upgraded to “market perform” from “underperform” with the target rising to $2.25 from $1.75.
Paramount Resources (POU-T) was upgraded to “market perform” from “underperform” with the price target rising to $2 from $1.25.
Painted Pony Energy (PONY-T) was upgraded to “market perform” from “underperform” with the price target rising to 80 cents from 75 cents.
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RBC Capital Markets analyst Kate Fitzsimons upgraded shares of clothing retailer The Gap Inc. (GPS-N) to “outperform” from “market perform.”
“With secular tailwinds at Old Navy and Athleta’s backs post-COVID, we see potential for value unlock at the Gap brand, aided by multiple catalysts including a fall 2020 analyst day, the 1H21 Yeezy Gap launch, and productivity stabilization and fixed cost reduction efforts on a smaller fleet to come.”
Ms. Fitzsimons noted that Gap stock has struggled in the last five years due to margin pressure at Gap and Banana Republic, as well as volatility at Old Navy last year. “Certainly COVID-19 pressures have dealt further pain to the P&L and the stock, with shares down 36 per cent YTD.”
Still, she sees “multiple catalysts” ahead that will raise shares from depressed levels, including a fall 2020 analyst day, strength at Old Navy, the 1H21 launch of Yeezy Gap and benefits from 2020 store closures, rent renegotiations, and expense reductions efforts.
“In our view, stabilizing the Gap brand is key to stabilizing overall profitability, on top of regaining momentum at Old Navy and Athleta post COVID-19,” Ms. Fitzsimons wrote. She raised her price target to US$18 from $13.
The median analyst target is $11.
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CIBC World Markets made rating changes to a couple of miners after recent positive market trends in the price of copper and iron ore.
Analyst Oscar Cabrera upgraded Capstone Mining (CS-T) from “neutral” to “outperformer”, and increased his price target to C$1.30 (from C$0.60). But he downgraded Ero Copper (ERO-T) from “outperformer” to “neutral” on valuation, increasing the company price target to C$19 (from C$17.50).
“We raised our 2020-21 copper and iron ore forecasts modestly as COVID-19 led supply disruptions resulted in tighter fundamentals. Also, the re-opening of G7 economies and proposed stimulus packages by these countries led to an improved market sentiment, resulting in an unexpected “V-shaped” copper price recovery and an iron price above $100/ tonne, from the March 2020 lows, plus increased risk appetite/share appreciation for mining equities. The latter led to an increase in our P/E and EV/EBITDA target multiples,” Mr. Cabrera commented.
“There is as still high degree of uncertainty with the containment of the COVID-19 pandemic, despite the re-opening of the world’s largest economies. We continue to assume a full recovery in metal demand in H2/2021, but acknowledge that this could be pulled forward by an infrastructure-led stimulus in China on top of the RMB 4.75T announced by the country’s National People’s Congress on May 22, 2020. In addition, the long-lasting effects of COVID19 disruptions in Cu development projects (i.e., Chuquicamata, El Teniente) raised our 2021-22 forecast an average of ~4%. Most other 2021-22 commodity forecasts remain largely unchanged; however, we lowered our 2021 HCC 3.6% due to higher supply availability,” he added.
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CIBC World Markets raised its price target on Cargojet (CJT-T), expecting a continued lift in its earnings because of the COVID-19 crisis.
Analyst Kevin Chiang raised his target to $176 from $150 and maintained an “outperformer” rating.
“We have adjusted our 2020 and 2021 EBITDA estimates to $191MM (from $185MM) and $208MM (from $201MM), respectively, to account for higher volumes across CJT’s segments, reflecting strength in e-commerce, the beginning of a recovery in B2B volumes, and higher international charter revenue. We believe COVID-19 has accelerated a number of structural tailwinds that were already benefiting CJT (e.g., e-commerce adoption) and expect this has steepened the company’s earnings curve,” Mr. Chiang said.
" We have raised our price target multiple to reflect the underlying defensiveness of CJT’s operations, as evidenced over the last four months, and above-average long-term growth,” he added.
The median analyst target is $147.50.
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Canaccord Genuity analyst Doug Taylor raised his stock price target on Calian Group Ltd. (CGY-T) to $70 from $54, citing two recent acquisitions in as many weeks.
“In our view, these transactions validate Calian’s ability to source accretive and potentially synergistic transactions in this M&A environment. We have worked these two small acquisitions and recent large contract wins into our model and have increased our target multiple (to 14x from 11x), reflecting improving sentiment towards Calian’s combination of growth, stability and yield,” he wrote.
Mr. Taylor noted that the company, which provides professional services in the areas of Health, IT, Training, Engineering and Manufacturing, has “proforma net cash of ~$26-million and an undrawn $60-milllion acquisition line.” He kept his “buy” rating on the stock.
The median analyst price target is $56.50.
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In other analyst moves Wednesday:
* Air Canada (AC-T): CIBC cuts target price to C$23 from C$25
* Alamos Gold Inc (AGI-T): CIBC raises target price to C$18 from C$14. Also, National Bank of Canada raises PT to C$16.50 from C$14
* Andlauer Healthcare Group Inc (AND-T): CIBC raises target price to C$37 from C$32
* Boralex Inc (BLX-T): Scotiabank raises target price to C$35.50 from C$33
* CAE Inc (CAE-T): CIBC cuts target price to C$26 from C$27
* Calfrac Well Services Ltd (CFW-T): Atb Capital cuts target price to C$0.14 from C$0.16
* Copper Mountain Mining Corp (CMMC-T): CIBC raises target price to C$0.8 from C$0.65
* First Quantum Minerals Ltd (FM-T): CIBC raises target price to C$15 from C$10
* GFL Environmental Inc (GFL-T): CIBC raises to outperformer from neutral
* Hardwoods Distribution Inc (HDI-T): National Bank of Canada raises PT to C$23 from C$21
* Hudbay Minerals Inc (HBM-T): CIBC raises target price to C$5 from C$3.5
* Imperial Metals Corp (III-T): CIBC raises target price to C$2.6 from C$1.9
* Ivanhoe Mines Ltd (IVN-T): CIBC raises target price to C$4.5 from C$2.8
* Lundin Mining Corp (LUN-T): CIBC raises target price to C$10 from C$8
* MCloud Technologies (MCLD-X): Alliance Global Partners starts with buy rating; PT C$7
* TFI International Inc (TFII-T): CIBC raises target price to C$55 from C$47
With files from Reuters
Darcy Keith
Roma Luciw