Inside the Market’s roundup of some of today’s key analyst actions
Analysts are adjusting their price targets on Shopify Inc. (SHOP-N, SHOP-T) following a second-quarter earnings beat and upbeat sales growth outlook that sent its shares up more than 17% on Wednesday.
Wells Fargo and Evercore analysts both raised their price targets to US$80 from US$75, while ATB Capital Markets raised its target to C$120 from C$115 and Truist Securities raised its target to US$65 from US$55. Deutsche Bank raised its target to US$85 from US$80 and UBS raised its target to US$75 from $71.
Citigroup was an outlier, cutting its target price to US$90 from US$97.
All this brought the average price target to US$76.49, up from US$75.31 a month ago, according to LSEG data.
Second quarter revenue at Shopify came in at US$2.045 billion, above consensus at $2.01 billion, while earnings per share of 26 cents beat the consensus of 20 cents. The beats surpassed that of the previous quarter thanks to strong new merchant additions to its platform.
Third quarter guidance calls for growth and operating leverage to continue, with the mid-point of guidance calling for $2.11 billion in revenue, above consensus at $2.07 billion.
RBC analyst Paul Treiber, who maintained an “outperform” rating and US$85 price target on the stock, raised his fiscal year 2024 revenue estimate to US$8.68 billion from US$8.51 billion following the earnings. He now expects adjusted EPS of US$1.09, up from 90 cents.
“Shopify is seeing operating leverage, given its ROI philosophy and opex discipline. Strong execution is helping sustain growth, despite sluggish consumer spending,” Mr. Treiber said in a note.
ATB analyst Martin Toner also reiterated an “outperform” rating.
“The beat and guidance hints at strong growth in the back half of the year,” Mr. Toner commented in a note. “Today’s results should somewhat alleviate concerns of operating expense growth and a lack of near-term operating leverage.”
“The impact of a mix shift at Shopify to enterprise customers is an ongoing controversy. While that mix shift introduces total attach rate headwinds, we believe the tailwinds remain powerful and that attach rate will continue to move higher, supporting growth and operating leverage. Given the underperformance compared to mega-cap tech and a valuation well below recent historical averages, we believe Shopify’s shares still have “room to run”, despite today’s move,” Mr. Toner said.
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Raymond James analyst Frederic Bastien downgraded Stantec Inc. (STN-T) to “market perform” from “outperform” in the wake of the company’s second quarter results. He also trimmed his price target to C$120 from C$125.
The quarterly results were largely in line with expectations. Net revenue grew a stronger-than-anticipated 17% thanks to acquisitions completed over the past 12 months. Adjusted earnings per share of $1.12 was in line with Street estimates.
“To be clear, there was nothing alarming about the company’s quarterly performance per se. But with organic growth decelerating from 2023′s elevated levels, management tempering its expectations for margin expansion somewhat, and the U.S. presidential election cycle causing some project owners to pause or slow investment decisions, we believe Stantec’s valuation has little to no room to move higher through our forecast horizon,” Mr. Bastien explained in a note.
He said he sees better upside potential in shares of WSP Global as well as AtkinsRealis.
The average analyst price target is C$126.80.
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Several analysts raised their price targets on Suncor Energy Inc (SU-T) following a strong second quarter.
Among them: National Bank of Canada raised its target to C$77 from C$75; RBC raised its target to C$67 from C$65; and Raymond James upped its target to C$52 from C$51.
The average analyst price target is now C$60.55, up from C$60.06 a month ago.
Analysts applauded what they’ve seen so far from Suncor’s new CEO, Rich Kruger.
“New leadership at SU is clearly paying proverbial dividends with continued operational improvements in both the upstream and downstream business,” said Raymond James analyst Michael Barth.
However, Mr. Barth also noted that further improvements are going to be hard-fought at the company, and he maintained a “market perform” rating - the equivalent of a hold.
“Would we brandish bayonets and follow Rich Kruger into battle? Absolutely. At the same time, we think his rallying cry has already adequately completed the task of resetting near-term investor expectations higher, and it’s challenging for us to see how SU meaningfully clears these new expectation hurdles. At a minimum, we’ve already included significant production, refining utilization, turnaround speed/cost, and OS&G improvements in our model. Beyond the near-term improvement plan that has clearly captured investor attention, we remain concerned about the path to base mine end-of-life and the fact that SU could be heading into base mine decline with leverage at the high end of the peer group range. While that may not be a focus for investors today, it’s ultimately an unavoidable challenge that will creep into the conversation as the near-term improvement plan runs its course. As such, we continue to believe that the stock is more-or-less fairly valued at strip pricing,” the Raymond James analyst said.
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Canaccord Genuity analyst Robert Young slashed his price target on Pollard Banknote Ltd. (PBL-T) following news this week that the Michigan Lottery will not renew its iLottery contract with the company when it ends in July 2026. He’s concerned that other contracts are now at risk.
His price target went to C$28 from C$40, but he maintained a “buy” rating given that his new target still represents substantial upside.
Pollard was awarded an iLottery contract from the Michigan Lottery in 2013, after which it entered into a contract with NeoGames to provide its technology platform in exchange for a 50% financial interest in the operation. Following the Michigan contract, in 2014, NeoPollard Interactive was formed as a joint venture. NPi has five contracts, including the Alberta Gaming Liquor and Cannabis Agency, New Hampshire Lottery, North Carolina Education Lottery, Virginia Lottery, and the West Virginia Lottery. In early 2023, Pollard announced a change to its NPi joint venture agreement allowing NeoGames to pursue North American iLottery contracts independently.
The decision from the Michigan Lottery resulted from NeoGames and Pollard choosing to pursue the opportunity independently, Mr. Young noted.
“While the financial impact of this contract loss won’t be felt until H2/26, we believe the outcome puts four additional North American contracts at risk. These contracts are likely to remain in place through their conclusion (ending in 2029 through 2034), but the risk that they will follow a similar path as Michigan is now very high, in our view. This would effectively place a cap on the US iLottery opportunity, which is an important vector of growth and a significant profit contributor,” Mr. Young said in a note to clients.
The average price target is C$39.38, down from C$42.38 a month ago.
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A couple price targets have come down on Air Canada (AC-T) following its second-quarter results, which were overall in-line with preliminary figures released on July 22.
ATB Capital Markets cut its target price to C$27 from C$28 while JP Morgan cut its target price to C$36 from C$41.
While ATB Capital Markets analyst Chris Murray said overall demand conditions appeared supportive of stock price gains to come, he trimmed his target reflecting his revised earnings estimates and a modestly lower multiple reflecting peer valuations.
Mr. Murray still rates Air Canada “outperform”.
“Full results revealed moderating load factor and yield trends on normalizing supply/demand conditions, which were most evident on Atlantic-based routes,” he commented in a note to clients. “Management was constructive on demand conditions entering H2/24 and plans to add capacity on Pacific routes, which remained a strong source of growth in Q2/24 despite moderating yield trends. The company provided limited new disclosures regarding ongoing negotiations with ALPA but remained optimistic that a resolution could be reached in the coming weeks. With shares trading at sub-3.0x EBITDA and demand conditions intact, we see deep value in shares of AC with its pilots and resumption of share repurchases remaining potential near-term catalysts. We expect stable demand conditions and better cost controls to support H2/24 and 2025 margin trends.”
The average analyst price target is C$22.77.
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In other analyst actions:
American Hotel Income Properties REIT LP (HOT-UN-T): CIBC cuts PT to $0.33 from $0.40
Bank of Montreal (BMO-T): TD Cowen cuts target price to C$130 from C$134
Canadian Imperial Bank of Commerce (CM-T): TD Cowen raises PT to C$83 from C$76
Computer Modelling Group Ltd (CMG-T): CIBC raises target price to C$15 from C$13.50
Coveo Solutions Inc (CVO-T): RBC cuts target price to C$11 from C$13; BMO cuts target price to C$10 from C$10.5; Stifel cuts target price to C$10 from C$12; TD Cowen cuts target price to C$11 from C$12
Crew Energy Inc (CR-T): Cormark Securities cuts target price to C$7 from C$8.50
Dri Healthcare Trust (DHT-UN-T): Raymond James cuts target price to C$20 from C$24
ECN Capital Corp (ECN-T): CIBC raises target price to C$2.25 from C$2; National Bank of Canada raises PT to C$2.5 from C$2.25
Enerflex Ltd (EFX-T): BMO raises target price to C$11 from C$10; TD Cowen raises target price to C$11 from C$10
Great-West Lifeco Inc (GWO-T): RBC raises target price to C$47 from C$45
European Residential REIT (ERE-UN-T): CIBC raises target price to C$3.50 from C$3; TD Cowen raises PT to C$3.50 from C$3.25
Fiera Capital Corp (FSZ-T): CIBC cuts target price to C$8 from C$9; TD Cowen cuts target price to C$7.50 from C$8
Greenlane Renewables Inc (GRN-T): TD Cowen cuts target price to C$0.05 from C$0.10 and downgrades rating to “sell” from “hold”
iA Financial Corporation Inc (IAG-T): CIBC raises target price to C$106 from C$100; RBC raises target price to C$105 from C$102; BMO raises target price to C$111 from C$102; Scotiabank raises PT to C$110 from C$100
Kits Eyecare Ltd (KITS-T): Haywood Securities raises target price to C$13 from C$11; Stifel raises target price to C$14 from C$9; Ventum Financial raises target price to C$12.50 from C$11.25
National Bank of Canada (NA-T): TD Cowen raises target price to C$123 from C$121
Royal Bank of Canada (RY-T): TD Cowen raises target price to C$171 from C$160
Scotiabank (BNS-T): TD Cowen raises target price to C$69 from C$68
Stella-Jones Inc (SJ-T): CIBC raises target price to C$97 from C$94; TD Cowen raises target price to C$103 from C$98
Step Energy Services Ltd (STEP-T): RBC cuts target price to C$5 from C$5.50