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Tuesday’s analyst upgrades and downgrades



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

When Dollarama Inc. (DOL-T) reports its first-quarter 2025 financial results before the bell on Wednesday, Desjardins Securities analyst Chris Li expects to see same-store sales growth “normalization” toward the retailer’s full-year guidance of 3.5-4.5 per cent.

“Our SSSG estimate of 5.5 per cent is largely in line with consensus of 6 per cent,” he added. “But given the wide range (4.5‒7 per cent), combined with DOL’s premium valuation, we believe there is risk to the extent that some investors expect SSSG to come in at the high end of consensus. Despite the potential for share price volatility in the near term, we maintain our positive long-term view.”

Mr. Li is now projecting adjusted earnings per share for the quarter of 75 cents, up 12 cents from the same period a year ago and matching the consensus on the Street.

“Our [SSSG] forecast is directionally in line with management’s comment on the 4Q call in early April that consumer demand was strong early in the quarter (ie SSSG trended above annual guidance of 3.5‒4.5 per cent) and normalized as the quarter progressed,” he said. “The consensus expectation is quite wide (4.5‒7.0 per cent).

“Gross margin of 43.0 per cent (up 80 basis points year-over-year) is in line with consensus and driven by lower inbound shipping and logistics costs.”

Mr. Li also said his latest pricing survey, which was conducted in late May/early June, “finds that competition remains rational, with DOL maintaining its compelling value proposition (40–50 per cent lower vs WMT and AMZN on price per unit) and $4.25+ products continuing to expand and enhance the treasure hunt experience with new products in core destination categories (toys, kitchen, gardening, etc).”

After increasing his price-to-earnings target to “reflect the continuing favourable consumer trend to discount, strong earnings visibility, structural industry tailwinds and attractive growth from Dollarcity,” he raised his target for Dollarama shares to $133 from $120, keeping a “buy” recommendation. The average target on the Street is $122.27, according to LSEG data.

“While DOL’s premium valuation increases share price volatility, we maintain our view that DOL should be a core long-term holding,” he concluded.


National Bank Financial analyst Maxim Sytchev sees Bird Construction Inc.’s (BDT-T) $135-million deal for Surrey, B.C.-based civil infrastructure contractor Jacob Bros Construction as “a highly accretive acquisition in a strategically attractive space.”

After the bell on Monday, Bird announced the move, which it establishes it in “B.C.’s high-demand civil infrastructure market and adds significant scale and diversification in the region.” The company expects value creation through anticipated 10-per-cent adjusted earnings per share accretion “with further potential upside from cross-selling opportunities and other synergies.”

“The transaction will add 350 employees to Bird’s existing 5,000+ strong workforce and expand its capabilities and expertise in the Infrastructure vertical (21 per cent on a pro-forma basis vs. 13 per cent in 2023A) in Western Canada, capitalizing on continued strong end-market demand in the region,” said Mr. Sytchev. “Jacob is expected to generate $300-milllion in revenues and $37-million n adjusted EBITDA (a 12.3-per-cent margin vs. legacy 5.5 per cent for BDT) as well as $350-milllion in backlog (a 10-per-cent increase to BDT’s $3.5-billion Q1/24 backlog). Total consideration for the deal is $135-milllion, implying a 3.7 times EV/EBITDA multiple on 2024E forecasts before any further cost or revenue synergies. The purchase of Jacob Bros is expected to be immediately accretive to margins.”

Mr. Sytchev called it a “solid” deal, adding “using some of the (expensive) equity makes sense.” The acquisition will be financed by the issuance of 1.49 million Bird shares for $33.8-million, implying an average price of $22.68, which is a 4-per-cent discount to Monday’s close.”

“It’s difficult to formulate an in-depth view around the context for premium EBITDA margin in the case of Jacob Bros (approximately 12 per cent vs. BDT’s 5.5 per cent – self-perform nature of the work / niche are the most likely explanations) and 3.7 times EV/EBITDA paid, but BDT’s management rightfully (partially) is using its (premium) equity to fund the purchase,” he said. “With the legacy Stuart Olson deal that strengthened BDT’s presence in the MRO space, the Western Canadian Buildings market, and also electrical capabilities, the Jacob deal provides a deeper in-fill in B.C. while also rebalancing the end-market exposure to 21 per cent Infrastructure (from 9 per cent in 2019). Investors should like the deal as it checks the strategic, margin, and accretion rationales.”

Maintaining his “sector perform” rating, Mr. Sytchev raised his target for Bird shares to $23 from $21 on incorporation of the acquired asset. The average is $25.25.

Elsewhere, others making changes include:

* BMO’s John Gibson to $29 from $25 with an “outperform” rating.

“In addition to increasing its business mix toward more infrastructure-type end markets, BDT should also benefit from additional cross-selling as the two already overlap on several projects. Closing is expected in early Q3/24,” said Mr. Gibson.

“In our recent initiation on the company, we touched on BDT’s solid M&A track record, which targets new markets, higher-margin work and additional cross-selling opportunities. In our view, this acquisition is in line with this strategy and should help continue to grow its margin profile. BDT expects a 60 basis points increase to full-year EBITDA margins, which is reflected in our 2025 assumptions (now 6.9 per cent vs 6.3 per cent prior). BDT also estimates EPS accretion to be 10 per cent.”

* Stifel’s Ian Gillies to $30 from $25 with a “buy” rating.

“This deal enhances the company’s strategic position in key Western Canadian infrastructure markets, enhances margins, improves per share growth and largely retains robust ROE and ROCE metrics. We believe this deal further bolsters the case for a re-rating of BDT’s 2025 valuation of 8.9 times P/E. Moreover, we believe BDT is building a reputation as a smart acquirer of businesses given its recent track record,” said Mr. Gillies.


Pointing to growing e-commerce prospects, JP Morgan analyst Reginald Smith initiated coverage of Shopify Inc. (SHOP-N, SHOP-T) with an “overweight” rating on Tuesday, believing a recent pullback in its shares following the May 8 release of its quarterly results presents an attractive entry point for new investors.

The firm is projecting 18-per-cent compounded revenue growth through 2026 as the Ottawa-based e-commerce giant benefits from secular shift toward e-commerce and scales growth initiatives.

“We size Shopify’s global serviceable ecommerce GMV opportunity ex-China, Amazon, Apple and Walmart at $1.9-trillion, which translates into a nearly $60-billion serviceable revenue opportunity,” he said.

Also seeing offline retail presenting an incremental US$60-90-billion opportunity globally, Mr. Smith and his team set a US$74 target. The average target on the Street is US$75.51.


National Bank Financial analyst Ahmed Abdullah thinks CCL Industries Inc.’s (CCL.B-T) deal to acquire the remaining 50-per-cent stake in its Middle East joint venture (Pacman-CCL) from Dubai’s Albwardy Investment LLC for a cash consideration of $143-million comes as “no surprise” given its history of buying out partners.

In a research note following Monday’s move, he emphasized “, the strategic geographic nature of this JV offers good positioning for CCL to benefit from growth in the region and adjacent frontier markets.”

“Dubai-based Pacman-CCL operates a total of five manufacturing facilities across the U.A.E., Oman, Egypt, Saudi Arabia, and Pakistan,” said Mr. Abdullah. “It recorded revenue of $34M and adjusted EBITDA of $14-milion in the first four months of 2024. We estimate annual revenue of $102-million and adjusted EBITDA of $42-million (41-per-cent margin) or closer to $36-million (35-per-cent margin) if we normalize for likely FX tailwinds. Transaction multiple looks like 7 times annualized EBITDA. The business will immediately begin trading as CCL Label and results will be fully consolidated as of the date of acquisition.”

“We updated our forecast for the full consolidation of Pacman-CCL into results. This had an incrementally positive impact on margins which moved up 10 bps in each of 2024E and 2025E. We see leverage at 1.22 times in 2QE (1.18 times at 1Q). Cash at 1Q was $748-million and US$0.94-billion was available on revolving credit facility. Eight acquisitions were done in 2023 (total spend $370-million, Revs $200-million, EBITDA $46-million). CCL likely reports 2Q in the second week of August.”

Maintaining his “outperform” recommendation for CCL shares, Mr. Abdullah raised his target by $1 to $84. The average is $83.60.

Elsewhere, Raymond James’ Michael Glen increased his target to $84 from $80 with an “outperform” rating following a tour of CCL’s Label and new Checkpoint RFID facility in Mexico City.

“CCL views Mexico as one of their most important growth regions, and we would expect capital to continue being allocated in the region,” he said. “The biggest driver of this growth is aligning capacity with where customers are investing. This could either be customers investing to sell product in Mexico / Latin America and/or finished product into North America. For Checkpoint, CCL is strategically placing radio frequency identification (RFID) capacity in Mexico as part of a near-shoring strategy to serve a growing list of large customers in the general merchandise and apparel markets. The majority of CCL’s Mexico business (Checkpoint, Label and Innovia) are run by Ben Lilienthal, who has an extensive career in Label manufacturing which includes 22 years with CCL.”


Scotia Capital analyst Konark Gupta thinks Cargojet Inc. (CJT-T) is “tapping the growing fast-fashion market” with its multi-year contract worth $160-million from Great Vision HK Express to provide scheduled charter services between China and Canada.

“CJT’s newest customer is an integrated logistics provider of end-to-end supply chain solutions. Its shipping clients potentially include growing fast-fashion e-commerce houses such as Temu, SHEIN, and others,” he said. “According to a recent CBC article, Temu, SHEIN, Alibaba and TikTok ship around 4,000 tonnes, 5,000 tonnes, 1,000 tonnes and 800 tonnes a day, together equating to 108 Boeing 777 freighters daily. The State of Fashion 2024 report, published by Business of Fashion and McKinsey, estimates that 40 per cent of U.S. and 26 per centof U.K. consumers shop at SHEIN or Temu.

“We believe Canada has yet to catch up with the U.S. and the U.K. on the rising fast-fashion shopping trends, which is why perhaps Great Vision HK Express switched from belly cargo to CJT. We remind that management noted on the Q1/24 earnings call that the Chinese e-commerce opportunities it had been pursuing were expected to be realized later this year.”

Mr. Gupta also thinks Mississauga-based Cargojet could boost its Domestic segment revenue over time, “leveraging its 16-city network in Canada (including Vancouver) as Great Vision HK Express expands the reach of its e-commerce partners across the country.”

“We have increased our annualized revenue, EBITDA and FCF estimates by 5 per cent, 7 per cent and 12 per cent, respectively,” he said. “We are assuming that management’s directional guidance for All-in Charter revenue of $20-$25-million per quarter (or $80-$100-million a year) did not reflect the vast majority of the new contract ($160-million over three years). Given CJT plans to utilize existing assets to service the new customer, we are assuming higher incremental margins than the 33-34-per-cent run-rate at the consolidated level. However, we think there could be some upfront costs (e.g. crew related) that may initially drag down margins, which we tried to reflect in our revised Q2/24 estimates. We are not changing our Domestic revenue forecasts at this time, although we see opportunities down the road from this new contract, while we remind that management believes the network has excess capacity to grow revenue by 15-20 per cent without any additional aircraft. We also believe that CJT has potential to explore ACMI opportunities with Great Vision HK Express in the future, depending on its contract performance, China-Canada market growth and other factors.”

The analyst raised his target for Cargojet to $160 from $145, exceeding the $150.91 average, with a “sector outperform” rating.


Eight Capital analyst Ralph M. Profiti sees Western Copper & Gold Corp.’s (WRN-T) Casino deposit in the Whitehorse Mining District in west-central Yukon as a “key copper-gold development project in an emerging district with support of strong strategic investors.”

In a research report released Tuesday, he initiated coverage of the Vancouver-based company with a “buy” recommendations, emphasizing “high-quality, large-scale, undeveloped copper projects in favorable jurisdictions will hold strategic importance and a premium valuation in the next copper cycle.”

“We believe Casino’s development optionality as a large-scale, open pit copper porphyry in a Tier One jurisdiction, with a low-strip ratio and low cash costs owing to significant gold credits, ideally positions WRN for a continued re-rating against a backdrop of project de-risking catalysts (permitting, power, final tailings design, and partnerships) and our forecasted increasing copper market deficits beginning in 2027 and our estimated startup in 2032,” he said.

“We believe the copper mining industry is entering a prosperity-phase where new entrants emerge during the early stages of a ‘company-making’ phase of the cycle driven by rising copper prices, while established industry participants react more slowly to build new capacity relative to previous cycles, and established mining districts face tougher regulatory hurdles. Long-term, we believe Casino is ideally suited as an M&A target, offering exposure to a high-copper-equivalent grade porphyry deposit with district-scale potential and improving access to necessary infrastructure, including power and transportation networks that is expected to enhance project economics. We believe large-scale copper porphyry deposits that are not already owned by major miners hold strategic value due to their scarcity, size, and amenability to conventional open-pit mining.”

Mr. Profiti said he sees Rio Tinto and Mitsubishi Materials Corp. “as highly-committed strategic investors, which reinforces our conviction that Casino will advance through permitting and into development.”

“Rio and Mitsubishi Materials hold 9.7 per cent and 4.8-per-cent equity stakes in WRN shares, respectively,” he added. “Over time, we see an increased probability of consolidation of the Casino Project into a larger mining entity once permitted and development progresses, and key infrastructure challenges allow for a potentially greater scale of operations. In our view, Rio is the most logical suitor, with Mitsubishi Materials playing a minority-owner role; however, M&A optionality is still quite high, with potential interest from Agnico (AEM-T, BUY, TP C$105), Barrick (ABX-T, BUY, TP C$36), and First Quantum (FM-T, NEUTRAL, TP C$17).”

He set a target of $4.25 per share. The other analyst on the Street covering the company, Cormark’s Stefan Ioannou, has a $4 target and also a “buy” rating.


In other analyst actions:

* TD Securities’ Michael Tupholme raised his AtkinsRéalis (ATRL-T) target to $68, exceeding the $62.45 average, from $65 with a “buy” rating.

* Scotia’s Jason Bouvier cut his Canadian Natural Resources Ltd. (CNQ-T) target to $57 from $114 to reflect its stock split with a “sector perform” rating. The average is $55.78.

* Jefferies’ Owen Bennett increased his Canopy Growth Corp. (WEED-T) target to $10.63 from $4.90 with a “hold” rating. The average is $9.05.

* In response to Warner Brothers Discovery’s decision not to renew w some of its programming and trademark output arrangement upon their expiry on Dec. 31, RBC’s Drew McReynolds cut his Corus Entertainment Inc. (CJR.B-T) target to 50 cents from $1.25 with a “sector perform” rating, while National Bank’s Adam Shine lowered his target to 25 cents from 40 cents with an “underperform” recommendation. The average is 42 cents.

“The WBD deals in question involve HGTV Canada, Food Network Canada, Cooking Channel Canada, Magnolia Network Canada, and OWN (Oprah Winfrey Network) Canada,” said Mr. Shine. “These channels generated roughly $155-million in revs and just under $50-million in EBITDA in fiscal 2022 per CRTC filings which don’t include high-margin digital sales (estimated over $17-million) generated via STACKTV. While this programming will move to Rogers [RCI.B:S&P/TSX, rated Outperform], it remains to be seen how Corus will rebrand these channels and find alternative content suppliers.”

“We’ll see what else management might have to say in two weeks regarding WBD, but results in f2024 continue to show weak top-line performance and greater TV EBITDA pressure post-Q1.”

* National Bank’s Don DeMarco resumed coverage of Fortuna Silver Mines Inc. (FVI-T) following the close of its $172.5-million convertible senior notes financing with a “sector perform” rating and $9 target. The average is $7.24.

“FVI exchanged expensive, restrictive debt for more flexible, cheaper convertible notes, which helps strengthen balance sheet, mitigate risks and provides dry powder to capture the best opportunities across FVI’s portfolio, whether at Diamba Sud, Séguéla incl Kingfisher and other discoveries or the Yessi vein,” he said. “FVI could have continued the path of harvesting cash flow and using funds to gradually pay down credit facility (on order of approximately $40-million per quarter), though a disproportionate weighting of FCF from the Séguéla mine heightens the liquidity impact of operating risks. The new converts are at a competitive 3.75-per-cent interest rate providing a favourable delta vs existing $45.7 million converts at 4.65 per cent and $125 million bank debt facility at 8 per cent. Earlier this year, FVI had bought back shares below NAV, and the issuance of the converts is timely with shares trading above NAV. After the announcement trading saw some volatility, likely related to hedge funds shorting expected allocations, which provided a buying opportunity.”

* Resuming coverage following its bought deal financing, BMO’s Rene Cartier trimmed his Solaris Resources Inc. (SLS-T) target to $14 from $15 with an “outperform” rating. The average is $15.74.

“Solaris has opportunities for positive news flow as it establishes an updated resource and as project studies are released. Moreover, we believe continued exploration success at Warintza, and at identified proximal targets, will support future opportunities to further increase resources. In our view, Solaris remains an acquisition candidate for companies looking to enhance their copper exposure,” he said.

* JP Morgan’s Michael Gambardella lowered his Stelco Holdings Inc. (STLC-T) target to $47 from $50 with an “overweight” recommendation. The average is $51.90.

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