June 20, 2024

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Monday’s analyst upgrades and downgrades

Monday’s analyst upgrades and downgrades

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

National Bank Financial analyst Gabriel Dechaine sees investing opportunities with Canadian banks heading into the start of second-quarter earnings season next week, however he warns “that’s it for now.”

“The Big-6 have underperformed the S&P/TSX by over 500 basis points since the end of Q1/22 reporting season,” he said. “In a normal environment, we’d view such underperformance as an amazing buying opportunity. However, we are not in a normal environment, and we believe several factors (e.g., slower asset growth potential, potential for a ‘mild’ shift in the credit cycle, recession/stagflation possibilities) outweigh what has been a primary selling feature of the sector over the past year (e.g., rate hikes/NIM expansion). Our bias into the quarter is towards the banks with the most domestic lending exposure, namely CM and NA. CM, especially, may seem to be a counter-intuitive pick considering its above-average exposure to the mortgage market. However, its valuation has corrected the most in the sector from peaks in January, which we believe limits downside risk. Moreover, we believe its domestic-focused lending exposure should insulate it from a credit standpoint (which we believe is the case for NA, as well). Finally, we believe it could deliver a positive surprise in the Capital Markets business, given a relatively higher exposure to FX & commodity trading activities.”

In a research report released Monday titled Storm before the calm, Mr. Dechaine emphasized a trio of themes to watch for the earnings season, which kicks off May 25. They are:

  • A moderation in the pace of performing provision reversals with “the volatile macroeconomic/geopolitical backdrop that has amplified recessionary concerns.” He added: “We note that our higher PCL [provision for credit losses] forecasts are one of the reasons we are 9 per cent below consensus EPS forecast, on average for Q2/22.”
  • A slowdown in the housing markets, which could lead mortgage volumes to drop. He called it a “second-half story.”
  • Wage inflation could curb expense growth guidance, saying he’s “concerned” forecasts may need to be increased.

Seeing it trading “right at book value,” Mr. Dechaine raised his rating for Canadian Western Bank (CWB-T) to “outperform” from “sector perform,” believing it “offers strong loan growth performance, potential for positive NIM [net interest margin] surprises and a strong track record of credit performance.”

“While the Big 6 may see decelerating loan growth momentum from their mortgage-heavy loan books (approximately half of Big 6 loans are domestic RESL), CWB stands to benefit from the accelerating commercial loan growth environment (80 per cent of CWB’s loans),” he said. “The most recent BoC data suggests wholesale loans have accelerated to mid-teens growth rates year-over-year, while we believe RESL growth will slow in H2/2022.”

“When CWB provided updated FY2022 guidance alongside Q1/22 results, it increased its NIM outlook to reflect margin expansion of 3-5 basis points vs. FY2021 (from flat previously). Management’s guidance was underpinned by 75 bps of anticipated BoC rate hikes; however, the market is now pricing in over 3 times that amount of hikes. Despite some offsetting deposit cost pressures, we believe CWB could increase its NIM guidance with Q2/22 results.”

Also touting its “strong track record on credit performance,” Mr. Dechaine maintained a $44 target for CWB shares. The average target on the Street is $42.29, according to Refinitiv data.

While he “slightly” increased his second-quarter estimates due to rate increases on both sides of border, he maintained his other ratings and targets for bank stocks in his coverage universe. They are:

  • Bank of Montreal (BMO-T, “sector perform”) at $151. The average is $163.12.
  • Bank of Nova Scotia (BNS-T, “sector perform”) at $90. Average: $94.26.
  • Canadian Imperial Bank of Commerce (CM-T, “outperform”) at $167. Average: $169.50.
  • Laurentian Bank of Canada (LB-T, “sector perform”) at $49. Average: $46.
  • Royal Bank of Canada (RY-T, “outperform”) at $147. Average: $148.17.
  • Toronto-Dominion Bank (TD-T, “sector perform”) at $100. Average: $105.83.


Seeing a “more challenging” macro environment that is likely to “constrain sector valuation multiples and reduce earnings visibility,” RBC Dominion Securities analyst Geoffrey Kwan downgraded CI Financial Corp. (CIX-T) to “sector perform” from “outperform” on Monday.

“Last 12-month industry net sales peaked at $90-billion in November 2021 and are currently $72-billion,” he said. “Given the equity market decline and increased volatility, we think industry net sales are likely to weaken further. Historically, when industry net sales struggled, there was typically a significant delay until industry net sales recovered (often multiple quarters).

“As a result … CIX’s improvements in net sales performance in the past year could reverse. Positively, CIX’s overall investment performance remains strong vs. peers. However, despite improvements in net sales performance in 2021, we don’t think CIX conclusively returned to positive territory. With the market downturn, industry net sales slowing and CIX’s net redemptions in Q1/22 and April 2022, we think the potential positive catalyst of positive net sales performance may dissipate.”

Mr. Kwan emphasized sees a discount valuation (4.5 times next 12-month price-to-earnings) and an “attractive” dividend yield (4.8 per cent), but he sees the firm “missing a catalyst.”

“CIX plans an IPO of its U.S. RIA business later this year, and a successful offering could drive substantial upside in the share price. We think temporarily halting acquiring RIAs would help CIX demonstrate the ability to create value for shareholders (e.g., margin expansion), while simultaneously further helping the share price by diverting FCF for share buybacks,” he said.

The analyst cut his target for CI Financial shares to $19 from $26. The average is $23.06.

Elsewhere, Canaccord Genuity’s Scott Chan lowered his target to $23.50 from $27.50 with a “buy” rating, while CIBC’s Nik Priebe reduced his target to $23 from $28 with an “outperformer” rating.


Step Energy Services Ltd. (STEP-T) is “increasingly positioned to benefit from a soldout U.S. fracturing market,” according to RBC Dominion Securities analyst Keith Mackey, who expects it to “drive more consistent utilization and stronger service pricing.”

“Increased FCF generation should also allow the company to de-lever its balance sheet and enable modest multiple expansion,” he added.

That led Mr. Mackey to raise his recommendation for the Calgary-based company to “outperform” from “sector perform” previously.

“We expect U.S. industry fracturing horsepower utilization to average 80-90-plus per cent in 2022/23, with many contractors effectively sold out,” he said. “A growing chorus of providers have also pledged to focus on growing margins versus market share. As a result, industry prices have increased sharply, particularly in the Permian where STEP primarily operates. The current environment should support strong corporate utilization and margins, despite historical utilization swings. We estimate STEP’s 1Q22 annualized EBITDA/fleet was approximately $9-10-million, which we expect to improve to $11.7-million per fleet in FY22 and $13.8-million in FY23.

“Canada has generally been a solid contributor. 1Q22 EBITDA margin of 22 per cent increased 6 per cent year-over-year on 34-per-cent higher revenue from strong equipment operating days. The impact of 10-15-per-cent price increases part way through 1Q22 should also be reflected in subsequent quarters. We are modeling strong 81-per-cent utilization on STEP’s active pressure pumping horsepower through 2022.”

Mr. Mackey raised his target to $8 from $4 and above the $6.18 average.

Separately, he raised his targets for these stocks”

* CES Energy Solutions Corp. (CEU-T) to $3.25 from $2.75 with an “outperform” rating. Average: $3.80.

“CEU’s stronger 1Q22 results relative to both Street/RBC estimates were driven by a softer landing on pricing versus inflationary factors, primarily later in the quarter. Looking ahead, the company’s ability to grow revenue alongside industry rig activity while converting working capital into free cash flow remains a key input to our constructive thesis,” he said.

* Shawcor Ltd. (SCL-T) to $8 from $7 with an “outperform” rating. Average: $7.25.

“Shawcor’s 1Q22 results were better than expected as product demand surged in the latter stages of the quarter. Margins moved upward y/y in two of three divisions, and its healthy backlog signifies strong product demand and further margin accretion heading into upcycles in many of its key markets. The company remains committed to aligning with businesses that create full-cycle value,” he said.

* Trican Well Service Ltd. (TCW-T) to $6 from $5.50 with an “outperform” rating. Average: $5.25.

“Trican’s 1Q22 results were broadly in line with our expectations. We expect the company to generate double-digit revenue and EBITDA growth through 2023 and believe the company remains in a solid position to benefit from increased Canadian pressure pumping demand,” he said.


ATB Capital Markets analyst Tim Monachello thinks Shawcor Ltd.’s (SCL-T) upside now “outweighs” near-term risk, leading him to raise his recommendation to “outperform” from “sector perform” on Monday.

“SCL shares traded 24 per cent higher following Q1/22 results that roughly doubled management guidance, with adjusted EBITDAS at $19-million vs $10-million consensus/ATB estimates,” he said. “While we continue to believe SCL’s earnings are likely to be volatile given global supply chain challenges, it’s becoming clear to us that the underlying fundamentals across SCL’s business lines are, on balance, improving and that progressively stronger results through 2022 are likely to carry its shares higher as well. Overall, we now believe the risk/reward for investors is skewed to the upside – though SCL’s high beta and aforementioned high earnings volatility position it as a relatively high-risk, high-reward proposition within our coverage.”

Following the release of better-than-anticipated quarterly results last Thursday, Mr. Monachello thinks the Toronto-based oilfield services company’s earnings volatility and restructuring have “detracted” from its “otherwise high-multiple businesses.”

“Taken in isolation, SCL’s businesses should justifiably trade at elevated multiples – each of SCL’s business lines have varying degrees of positive momentum, and most are market share leaders: SCL’s pipe coating business is a world leader in both execution capabilities and technology with strong barriers to entry; its composite tank business is the North American market leader and has shown reliable growth with no signs of abating; SCL is a world leader in composite pipe manufacturing, which, while cyclical, has been gaining share against steel pipe; and its Automotive and Industrials segment is a low-cyclicality business with exposure to an emerging automotive electrification trend. Distracting from this underlying strength have been: 1) material earnings volatility given high operating leverage amplified by trough revenues from its energy business lines; 2) historically high financial leverage, though leverage has come down to more reasonable levels over recent quarters (2.9 times net debt/EBITDAS at Q2/22); and 3) significant restructuring activities and changes in the C-Suite, though we believe the vast majority of restructuring is now behind the company and run-rate G&A has fallen from roughly $75-million per quarter in 2019 to $50-$55-million in 2022,” he said. “Currently, SCL is trading at just 5.5 times 2022 estimated EV/EBITDAS, well below historical levels in the 8.0-12.0-times range, and we believe it could see a an upward multiple rerating over the coming quarters as results inflect – which represents a significant opportunity for shareholders.”

Though he warned of a “bumpy ride upward,” Mr. Monachello raised his target for Shawcor shares to $8 from $6.75. The average is $7.25.

“While we expect a generally improving earnings trend, earnings risk will likely remain elevated until revenues in SCL’s PPS segment have shown a consistent increase off cyclical bottoms, which will be evidence that project timing is less of a risk to earnings – this may already be underway given that certain PPS projects were accelerated into Q1/22,” he said. “In addition, supply chain challenges continue to pose a threat to productive capacities to varying degrees across SCL’s manufacturing businesses, though we believe initiatives are in place to mitigate these impacts moving forward. Though we believe earnings volatility could persist, the longer-term trend upward will likely overshadow this volatility over the medium term.”

Elsewhere, BMO Nesbitt Burns’ John Gibson upgradd Shawcor to “outperform” from “market perform” with a $7 target, up from $6.

“SCL has done a lot of work managing its cost structure through the downturn, and we now believe its various businesses are each turning a corner,” he said. “Note that SCL’s backlog reached $702 million in Q1/22 (its highest level since early-2015), and included records in both its Automotive/Industrial and Composite businesses.”


Echelon Partners analyst Andrew Semple anticipates TerrAscend Corp. (TER-CN) will benefit from the introduction of adult-use cannabis sales in New Jersey and see a recovery in its Pennsylvania operations through the remainder of 2022.

However, while he thinks the Toronto-based company’s outlook “remains constructive,” he sees upside for its shares as “diminished,” leading him to lowered his recommendation to “hold” from “speculative buy” after its sales results fell short of his expectations for a fourth consecutive quarter.

“Adult-use sales began in New Jersey in April, offering a strong growth driver for the remainder of this year and further out,” said Mr. Semple. “Performance in Pennsylvania also likely troughed in Q122, and the Company’s Maryland operations may benefit from possible adult-use approval by voters through ballot later this year. That said, a large proportion of this potential upside appears to be already accounted for in the consensus outlook, leaving little wiggle room for upside surprise, in our view. We note that consensus estimates call for Q222 EBITDA of $14.6-million, an $11.3-million improvement quarter-over-quarter despite Gage likely contributing only breakeven or negative EBITDA in Q222. Consensus estimates also call for $197-million of adj. EBITDA in 2023 with the Street-high estimate of $249-million, the latter amount being more than the combined sales we have modelled for New Jersey and Pennsylvania (the two key margin drivers). For context, our estimate (which we feel is a better base case) is for 2023 EBITDA of $125-million. We believe the consensus outlook is priced close to perfection, a contrast to recent financial performance. Although the consensus 2023 EBITDA estimate of $197-million is obtainable, we do not see much room for upside surprise on this amount, and we view it as probable that base-case results should be set lower than this, indicating further potential risk to forward consensus estimates even after recent revisions.”

Mr. Semple cut his target to $6 from $11. The current average is $12.17.

“TerrAscend’s business and financial performance should improve from here and we continue to see upside to the current share price,” he said. “However, in the context of much of our US cannabis coverage showing implied upside of more than 200 per cent after an excessive selloff (in our view), TerrAscend shares do not appear as relatively attractive based on the implied upside of 23 per cent to our new price target. As mentioned, we also believe the consensus may have priced New Jersey expectations to perfection, resulting in consensus estimates at a level where we do not see much room for outperformance (though we see room relative to our estimates). After several quarters of financial underperformance, we also prefer to see demonstrated execution.”


Despite raising his operating cost forecast to “reflect the challenging operating environment,” Desjardins Securities analyst John Sclodnick upgraded Karora Resources Inc. (KRR-T) to “buy” from “hold,” citing its current trading level and a potential 32-per-cent return to his target price.

“It now trades at 0.89 times NAV vs 1.17 times NAV when we downgraded it on April 21, 2022,” he said. “We believe a premium to peers is justified given its fully funded growth profile in Western Australia, with clear takeout potential with a massive land package among larger producers. It recently announced an expanded nickelresource atits BetaHuntmine, which should drive further value by increasing the nickel by-product credit and benefiting gold production costs as early as next year; this largely remains as upside to our estimates.

“We also note that Karora will be added to the MSCI small-cap index at the May 31 rebalancing; we expect demand of 3.1 million shares (or 2.2 days of trading) from this addition.”

Mr. Sclodnick trimmed his target to $6.75 from $7.50. The average is $7.09.


In other analyst actions:

* Citing “reduced visibility to future organic growth,” RBC’s Paul Treiber downgraded LifeSpeak Inc. (LSPK-T) to “sector perform” from “outperform” and cut his target to $1 from $11. The average is $5.11.

“Following Q1 results below expectations, LifeSpeak is trading at a materially reduced valuation,” he said. “While valuation (at 1.7 times forward 12-month EV/S) appears attractive in itself, the contraction in LifeSpeak’s valuation is similar to others in our coverage universe. However, LifeSpeak’s Q1 results show that organic growth is plateauing.”

* JP Morgan’s Ryan Brinkman raised his target for shares of ABC Technologies Holdings Inc. (ABCT-T) to $8, matching the average, from $7, keeping a “neutral” rating. Others making changes include: Scotia Capital’s Mark Neville to $8.50 from $8 with a “sector perform” rating and BMO’s Peter Sklar to $7 from $6 with an “outperform” rating.

“Despite ABC’s strong recovery and FQ3/22 results, we highlight that we are not recommending auto parts stocks,” said Mr. Sklar. “This is due to the ongoing depressed level of global vehicle production as a result of the global semiconductor shortage and the Ukraine/ Russia conflict. Additionally, we are increasingly wary of aggressive Fed tightening given the pace of overall inflation, and its potential future impact on auto demand.”

* CIBC’s John Zamparo cut his Aurora Cannabis Inc. (ACB-T) target to $3.75, below the $3.89 average, from $6.50 with a “neutral” rating.

* CIBC’s Scott Fromson lowered his Automotive Properties Real Estate Investment Trust (APR.UN-T) target to $15 from $17 with an “outperformer” rating. Other changes include: Raymond James’ Brad Sturges to $15.25 from $15.75 with an “outperform” rating, Desjardins Securities’ Kyle Stanley to $14.50 from $15 with a “hold” rating and TD Securities’ Jonathan Kelcher to $16 from $16.50 with a “buy” rating. The average is $15.02.

“The target price adjustment reflects a reduced target multiple in response to rising bond yields,” said Mr. Stanley. ”APR’s solid balance sheet (7.0 times D/EBITDA) with no near-term debt maturities positions it well in a volatile market. However, the limited growth upside supports our Hold rating.”

* CIBC’s Krista Friesen raised her target for Badger Infrastructure Solutions Ltd. (BDGI-T) target to $31.50 from $30, maintaining a “neutral” rating, while Stifel’s Maggie MacDougall bumped her target to $35 from $34.50 with a “buy” rating and Scotia’s Michael Doumet increased his target to $40 from $39 with a “sector outperform” rating. The average is $35.39.

“Activity gained momentum into 2Q22, and we believe the new alignment of go to market strategy, cost control and growing demand in nonresidential markets supports a positive outlook,” said Ms. MacDougall.

* Scotia’s Jonathan Goldman raised his CES Energy Solutions Corp. (CEU-T) to $3.60 from $3.30, below the $3.80 average, with a “sector outperform” rating.

* RBC’s Sam Crittenden cut his Capstone Copper Corp. (CS-T) target to $7 from $8 with an “outperform” rating. Other changes include: Scotia’s Orest Wowkodaw to $7 from $9 with a “sector outperform” rating, BMO’s Rene Cartier to $7 from $8 with an “outperform” rating and National Bank Financial’s Shane Nagle to $7.25 from $8 with a “sector perform” rating. The average is $8.61.

“We weigh our positive long-term growth outlook for the company with near-term headwinds related to inflationary pressures and integration of Mantos assets,” said Mr. Nagle. “The company continues to advance several transformational catalysts, including continued optimization of Pinto Valley, ongoing expansion initiatives at Cozamin and leveraging synergies with Mantos assets to include the development of Santo Domingo.”

* CIBC’s Hamir Patel cut his Cascades Inc. (CAS-T) target to $11 from $14 with a “neutral” rating, while Desjardins’ Frederic Tremblay lowered his target to $11.50 from $13 with a “hold” rating. The average is $13.79.

“Cascades’ weaker-than-expected 1Q results, mixed near-term outlook, difficulties in the Tissue segment and exposure to macroeconomic turbulence keep us on the sidelines,” said Mr. Tremblay. “While 2Q results are expected to improve sequentially from the weak 1Q, performance improvement in 2022 is expected to mostly materialize in 2H22.”

* BMO’s Tom MacKinnon raised his Definity Financial Corp. (DFY-T) target to $39 from $38 with an “outperform” rating, “reflecting increasing confidence in DFY’s ability to deliver, and continued firm market conditions.” Other changes include: Scotia’s Phil Hardie to $37 from $35 with a “sector outperform” rating and Raymond James’ Stephen Boland to $34.50 from $33.50 with an “outperform” rating. The average is $36.91.

* Mr. Patel raised his target for Interfor Corp. (IFP-T) to $45 from $42 with an “outperformer” rating. The average is $49.17.

* Canccord Genuity’s Aravinda Galappatthige increased his Cineplex Inc. (CGX-T) target by $1 to $18, above the $17.75 average, with a “speculative buy” rating.

“Our forecasts continue to assume a box office return to within 5 per cent of pre-pandemic levels by H2/22, with 2022 ending at 83 per cent,” he said. “We are particularly optimistic around Q4/22, when we see a meaningfully strong slate. However, we believe F2023 expectations reflect a more reasonable post-pandemic financial picture, with our forecasts suggesting box office 2023 revenues at 95 per cent of the 2019 levels.”

* CIBC’s John Zamparo cut his Diversified Royalty Corp. (DIV-T) target to $3.15 from $3.25 with a “neutral” rating. The average is $4.05.

* After “an in-line, no-drama” quarter, Canaccord Genuity’s Robert Young cut his Dye & Durham Ltd. (DND-T) target to $50 from $65, keeping a “buy” rating. The average is $47.50.

“Dye & Durham reported FQ3/CQ1 results in line with our model and consensus despite a more challenging real estate market backdrop. As well, management indicated that its previous guidance for F23 EBITDA greater than $350-million with EBITDA margins of 50-60 per cent remains relevant and achievable,” he said. “Pressure on real estate volumes in a tougher market plus nominal churn is a headwind on FQ4/CQ2. This is partly offset by bundling of the TELUS Assyst product in Quebec and the addition of two new customers (TD and CIBC Simplii). The big investor concern, however, appears to be the Link Administration acquisition, which management continues to see closing in FQ1/CQ3. Dye & Durham stock has seen significant weakness at odds with the financial performance and the reiterated F23 outlook. We believe a strong FCF profile, sticky revenue streams and geographic diversification are strengths in a market where investors seem to be biased against software with weak profitability. We remain BUY rated but are reducing our target to $50 (from $65) based on 13 times EV/2023 estimated EBITDA (from 15 times calendar 2022 estimated EBITDA), which reflects recent multiple compression in the sector.”

* RBC’s Geoffrey Kwan raised his ECN Capital Corp. (ECN-T) target to $7.50 from $7, keeping a “sector perform” rating. The average is $7.50.

“Q1/22 EPS was a penny above our forecast and consensus, with ECN also reiterating its 2022 and 2023 guidance. ECN continues to execute well on its growth strategy and we think is one of the few growth stories within our coverage universe that could generate significant valuation upside in a constructive economic environment. However, the macro environment is becoming more uncertain and our primary concern is the lack of data on how ECN’s businesses might perform from a growth perspective in a prolonged weak economic environment,” he said.

* Following in-line first-quarter results, National Bank Financial’s Patrick Kenny raised his Emera Inc. (EMA-T) target to $60 from $59, below the $64.97 average, with a “sector perform” rating.

* CIBC’s Nik Priebe cut his Guardian Capital Group Ltd. (GCG-T) target to $42 from $49, keeping an “outperformer” rating.

* Canaccord Genuity’s Yuri Lynk raised his Hardwoods Distribution Inc. (HDI-T) target to $63 from $60 with a “buy” rating. The average is $67.21.

“As the largest distributor of architectural-grade building products in the U.S., HDI is well positioned to benefit from the housing market’s strong long-term fundamentals despite higher rates and broader affordability issues,” said Mr. Lynk. “These fundamentals include favourable demographic factors, a housing stock shortage, and the continuation of the work-from-home trend. Additionally, the acquisitions of Novo (closed on July 30, 2021) and Mid-Am (closed Feb. 7, 2022) are proving supportive of gross margins and afford additional attractive cross-selling synergies. We continue to like HDI on its discounted valuation, strong competitive market positioning, and acquisition upside.”

* RBC’s Jimmy Shan increased his H&R Real Estate Investment Trust (HR.UN-T) target to $16 from $14.25 with a “sector perform” rating. Other changes include: BMO’s Jenny Ma to $18 from $16 with an “outperform” rating and CIBC’s Sumayya Syed to $17.50 from $15.50 with an “outperformer” rating. The average is $16.54.

“Q1/22 was jam-packed with many positive developments,” said Ms. Ma. “For investors who haven’t taken a closer look at HR.UN recently, this is likely not the REIT you think you know and should warrant your attention. As H&R progresses on its strategic repositioning plan, we believe the market should begin to recognize the deep-value embedded in the portfolio. The remarkable Q1/22 further confirms our strong conviction, and we reiterate that HR.UN is very undervalued.”

* National Bank Financial’s Matt Kornack trimmed his Inovalis REIT (INO.UN-T) target to $9 from $9.50, above the $8.75 average, with a “sector perform” rating, while Desjardins’ Michael Markidis cut his target to $8.50 from $9.75 with a “hold” rating.

* Stifel’s Justin Keywood trimmed his K-Bro Linen Inc. (KBL-T) target to $50 from $56 with a “buy” rating. The average is $43.56.

“We have confidence that management can navigate the near-term cost headwinds, as they have with other challenges, including when the hospitality business collapsed by 90 per cent in March 2020,” said Mr. Keywood. “As a result, we see an attractive entry point at what should be a financial reporting low and the yield is solid at 3.8%. Our lower $50 target reflects moderation in our EBITDA for the 2022, expected to be more robust subsequently but still showing 60-per-cent upside.”

* RBC’s Andrew Wong cut his Largo Inc. (LGO-T) target to $20 from $23, maintaining an “outperform” rating. The average is $18.60.

“We believe Largo continues to present good value, but with a complicated story and recent operational missteps, the company needs to execute better to unlock its potential and prove the longer-term value proposition can be realized,” said Mr. Wong. “Assuming execution improves, we think recent weakness in shares could mark a bottom as operations recover, the pigments business ramps up over the next several years, and (LCE) Largo Clean Energy gets reset for longer-term growth.”

* Trimming his estimates due to the impact of inflation, National Bank Financial’s Ryan Li cut his Lassonde Industries Inc. (LAS.A-T) target by $1 to $169 with an “outperform” rating, while Desjardins’ Frederic Tremblay lowered his target to $155 from $170 with a “hold” rating. The average is $162.

“In the near term, we anticipate continued challenges with rising input costs (orange/apple juice concentrate, PET) and higher freight/transportation expenses; however, benefits from pricing initiatives (full run rate of past price increases plus additional actions) and eventual benefits from Project Eagle are anticipated to increasingly aid margins through the remainder of 2022,” he said. “We believe that Lassonde is a mature and historically well-managed company, with potential to grow through continued organic vectors (market share gains) and future acquisitions (over the medium-to-long term).”

* BMO’s Stephen MacLeod reduced his Leon’s Furniture Ltd. (LNF-T) target to $20 from $28 with a “market perform” rating. He’s currently the lone equity analyst on the Street covering the retailer.

“Leon’s reported Q1/22 results that were below our forecasts, largely due to moderating sales vs. last year’s record levels, although revenue remains above pre-pandemic levels,” he said. “Lower sales and higher freight costs weighed on EBITDA, which declined 25 per cent year-over-year. Customer deposits remain elevated, suggesting future sales to come, but freight challenges linger. Leon’s is optimistic on underlying economic health, along with the opportunity for share gains over the long-term. While valuation has come down, our forecasts contemplate a return to more normalized earnings as 2022 progresses.”

* Ahead of Thursday’s release of its fourth-quarter 2022 results, RBC’s Paul Treiber reduced his Lightspeed Commerce Inc. (LSPD-N, LSPD-T) target to US$40 from US$50 with an “outperform” rating. The average is US$53.45.

“We believe there are three key focus areas this quarter including 1) customer location growth, 2) software monthly ARPU expansion, and 3) payments growth,” he said. “Earlier this month the company launched its omni-channel commerce platform, Lightspeed Retail, for all partner merchants, which we expect to be a topic of discussion on the conference call.”

“We believe LSPD is evolving into a commerce platform, with near-term success being driven by increasing monetization within its embedded base, via payments, while expanding customer count and ARPU to drive mid-term compounding organic revenue growth of 35-40 per cent. As proof-points that this growth trajectory is both achievable and transparent, we believe the shares can begin to re-rate higher.”

* Canaccord Genuity’s Scott Chan cut his target for Onex Corp. (ONEX-T) to $104 from $110 with a “buy” rating, while RBC’s Geoffrey Kwan raised his target to $110 from $108 with an “outperform” rating. The average is $106.40.

* In response to “a slow start to a solid year ahead,” Scotia’s Divya Goyal cut her Softchoice Corp. (SFTC-T) to $26 from $32 with a “sector outperform” rating. The average is $28.21.

“As per management, the EBITDA miss was primarily attributed to Gross Margin and OpEx pressure,” she said. “We consider the miss to be primarily a timing issue and not a negative reflection on the company’s overall ability to continue to perform during the year. Given the company’s well-established business model and a highly experienced management team, we expect the company to continue to grow steadily in years to come.”

* Canaccord Genuity’s John Bereznicki bumped his target for Superior Plus Corp. (SPB-T) to $15 from $13.50 with a “buy” rating. The average is $13.75.

“We continue to believe Superior is well positioned to grow in an inflationary environment while delivering efficient free cash flow conversion and an attractive dividend,” he said.