Inside the Market’s roundup of some of today’s key analyst actions
Desjardins Securities analyst Jerome Dubreuil upgraded Rogers Communications Inc. (RCI.B-T) to a “buy” recommendation from “hold” previously, pointing to “strong momentum in sports valuations as evidenced by recent transactions, upcoming private market valuation (PMV) updates in October and December, the looming monetization of the sports portfolio, and the de-risked Kilmer transaction.”
“While the Canadian telecom backdrop remains challenging, the FCF benefits from the recent impressive capex cut and the quiet promotional activity during back-to-school season make the elevated leverage easier to accept,” he added.
In a client report released before the bell, Mr. Dubreuil said recent professional sports team deals, including the a controlling stake of the Los Angeles Lakers, a minority stake of the Atlanta Falcons and a controlling stake of the Minnesota Timberwolves, “occurred at premiums to Forbes valuation of 20 per cent, 57 per cent and 25 per cent, respectively.” Those transactions increased his “confidence that this year’s increase in PMVs [private market valuations] could be higher than in past years.”
“We believe the monetization process (including the Kilmer deal, the folding of the Blue Jays into the structure, PMV updates and the sale of a minority stake) should create at least $5/share in value, which is not well reflected in the stock. Importantly, our thesis does not require the discount to PMV narrowing,” he said. “Still, the growing number of sports transactions indicates that the liquidity of sports assets, which has been limited and among the reasons for the discounts to PMV, is improving.”
“Some risks to our call. RCI’s sports portfolio is a unique set of assets and we are unsure if the portfolio structure could have an impact on its value. We also believe that a minority stake sale with net proceeds smaller than the Kilmer deal payment (without prospects of more near-term sales), which is not our base case, would be disappointing for investors. RCI remains highly levered and our call therefore probably requires a relatively stable telecom environment to work.”
Mr. Dubreuil maintained his 12-month target of $58 for Rogers shares. The average target on the Street is $58.35.
“Pecking order: BCE, RCI, QBR, T and CCA. BCE remains at the top of our pecking order, with datacentre catalysts on the horizon. T has underperformed peers since our downgrade following its results, and its valuation is now similar to its peers. Its catalysts (restructuring or asset divestitures in November) appear more speculative than BCE’s datacentres or increases in RCI’s sports valuation at this time,” he included.
National Bank Financial analyst Maxim Sytchev thinks RB Global Inc.’s (RBA-N, RBA-T) valuation is currently “misaligned” with the quality of its platform, emphasizing recent channel checks point to IAA “gaining mind(share).”
“Our conversations with insurance carriers characterized the two platforms (IAA and Copart) as broadly neck-and-neck operationally, with IAA potentially ahead on certain carrier-specific metrics and with a much more KPI-driven/client-focused go-to-market approach,” he explained. “IAA’s momentum may now be broadening beyond Progressive, with recent state-level data pointing to an increase in State Farm volume in Missouri with more similar markets to follow.
“Operationally, our sources told us that that recent cycle time remained almost seven days better year-over-year (a 13-per-cent to 15-per-cent improvement), and continued to improve sequentially, while downstream IAA expanded e-titling adoption while reducing aged inventory by 20 per cent. Progressive remains the most important validation of IAA’s turnaround, with the carrier’s recent allocation increasing from approximately 75 per cent to 90 per cent while early indications around Missouri (likely State Farm) are also encouraging.”
In a client report released Monday, Mr. Sytchev said RB Global, which purchased IAA, which is a global digital marketplace for damaged, low-value, and total-loss vehicles, for over US$7-billion in 2023, also points out “volume-driven discounts are a function of higher share with existing clients, not an indicator of structural, competition-driven pricing concessions.”
“When combining the dramatic 14-per-cent share price decline post the most recent quarter (and subsequent drift lower as we are now sitting two standard deviations below the mean when it comes to RBA’s valuation – a rare occurrence), investors are preoccupied with a potential ‘race to the bottom’ when it comes to market share and pricing vis-à-vis Copart; in a ‘rational’ economic duopoly this prisoner’s dilemma is relatively straightforward – both entities SHOULD elect to compete on service; and with our channel checks complete, we believe RBA’s shares are oversold and represent attractive fundamental value,” he explained.
“RBA’s decline in the take rate in Q2/26 is predominantly a function of a mix shift to agriculture and Automotive volume discounts as IAA gained share with key clients. We still believe that management will be able to grow its EBITDA at greater than services momentum.”
Seeing its valuation “sitting at a decade-low despite significant and consistent earnings compounding,” Mr. Sytchev moved his target for RBA shares to US$130 from US$133, keeping a “sector outperform” rating. The average target on the Street is US$135.17.
“RBA shares are now trading at 18.1 times P/E on an NTM [next 12-month] basis, representing the lowest level in a decade,” he said. “While a compressed valuation is never a reason to pound the table on a bullish thesis, one should keep in mind that the recent dislocation can hardly be attributed to structural shortcomings, and offers a compelling signal based on the RSI metric and the subsequent returns, especially over a 12-month time frame.”
“We have adjusted the pricing and volume growth assumptions in our model to reflect the consolidation of end-markets into the newly-created HE&T [Heavy Equipment & Transportation] segment (we did not make any structural adjustments retroactively), leaving overall GTV forecasts relatively stable. As a result of the shift in mix towards agriculture, we have lowered our take rate assumptions slightly and raised our COGS forecasts, though the impact on margins was largely offset by lower SG&A intensity given the increased scale. Lastly, we also nudged up our assumptions around intangibles amortization and interest costs but continue to see consistent revenue and earnings growth through our forecast horizon.”
Following “strong” first-quarter fiscal 2027 results from Tecsys Inc. (TCS-T), National Bank Financial analyst Doug Taylor sees a “quick rebound” in expectations for the Montreal-based supply chain management software provider.
“Management noted that given the nature of SaaS revenue being realized soon after signing/booked, FQ1’s better-than-expected bookings strength led to much of the meaningful guidance/visibility gains vs. the Company’s initial FY27 guidance provided with FQ4 results at the end of June,” he said. “As a result, Management expressed heightened confidence in hitting their prior year-end ARR targets.
“Core Elite SaaS growth is becoming more visible and better supported. Elite SaaS ARR grew 22 per cent year-over-year (CC), while record FQ1 Elite bookings and stronger installed-base expansion helped drive a $7.0-million sequential increase in total SaaS ARR despite continued non-Elite attrition. Visibility is also solid, with $63.8-million of SaaS RPO scheduled for the balance of FY27 covering nearly 90 per cent of the increased 16-18-per-cent SaaS growth guide. Bottom line, we believe the stronger bookings and expansions, alongside a diminishing legacy drag, are bringing the underlying growth profile into clearer view.”
Tecsys shares surged 6.6 per cent on Friday after it reported total revenue of $50-million for the quarter, up 8.9 per cent year-over-year and topping the expectations of both the analyst ($47.6-million) and the Street ($47.8-million). Adjusted EBITDA gained 13.7 per cent to $6.9-million also exceeding forecasts ($5.2-million and $5.0-million, respectively).
The company also increased its full-year guidance, projecting revenue growth of 5-8 per cent year-over-year versus 2-4 per cent previously and adjusted EBITDA margin of 11-14 per cent versus 11-13 per cent. Both also beat analysts’ projections.
“Margin inflection has more runway,” said Mr. Taylor. “SaaS-led gross-margin expansion and disciplined OpEx supported the increase in FY27 Adj. EBITDA margin guidance to 11-14 per cent. While the Company still expects some OpEx reinvestment through the rest of FY27, the longer-term margin setup is still constructive with Tecsys targeting 70-per-cent/75-per-cent SaaS margins exiting FY27 / FY28, from 66 per cent in FY26. Tecsys’ latest platform (Elite) margins are already more than 75 per cent, so that growing Elite mix and remaining legacy migrations should provide meaningful margin tailwinds beyond FY27.”
Seeing the quarterly release as positive for his investment thesis, Mr. Taylor raised his target for Tecsys shares by $1 to $41, exceeding the $38.92 average, to reflect higher expectations following improved Elite SaaS growth and raised FY27 guidance while slightly reducing his target multiple “on software sentiment and increased estimate variability (albeit positive in this instance).”
He kept an “outperform” rating.
Elsewhere, ATB Cormark’s Gavin Fairweather also raised his target to $41 from $40 with an “outperform” rating.
“TCS reported strong results across the board in Q1 and lifted its guidance for F27. We like the setup for the stock given its strong positioning in its niche, accelerating financials, and narrowing premium to small-cap software peers,” said Mr. Fairweather.
While Desjardins Securities analyst Benoit Poirier thinks new government funding “provides timely relief” for Transat AT Inc. (TRZ-T), he warns “competitive pricing continues to limit fuel cost pass-through.”
“TRZ reported weaker-than-expected 3Q FY26 results, although the larger-than-expected $105-million gross fuel headwind had already been disclosed in late August,” he added. “The key positive was the new $250-million government facility, which materially extends the liquidity runway and should provide sufficient funding if fuel prices evolve in line with the current forward curve.”
While emphasizing fuel prices “remain the key swing factor,” Mr. Poirier did point to several “constructive” indicators for the current quarter.
“Adjusted EBITDA was negative $1-million (vs $81-million last year), below consensus of $23-million and our $30-million forecast,“ he said. ”Management indicated that the year-over-year decline was almost entirely explained by fuel, with a $105-million gross increase partly offset by a $25-million LASR benefit. Higher salaries and enginerelated disruptions added pressure, with four aircraft grounded, one more than planned (the related $7-million compensation from P&W did not fully offset the negative impact). Meanwhile, the highly competitive conditions limited fuel cost pass-through and yield declined 1.0 per cent.
“TRZ expects 4Q capacity to increase 2 per cent year-over-year, with load factor 0.6ppts above last year and yield broadly in line. Management continues to adjust capacity to protect margins. Average fares are tracking 6 per cent higher, although the removal of shorter-haul Cuba flights affects the comparison. We now expect revenue growth of 4.0 per cent year-over-year for 4Q and 2.8 per cent for FY26.”
Keeping a “hold” rating for Transat shares, he lowered his target to $2.50 from $2.80 after cutting his earnings forecast through fiscal 2028. The average is $1.88
“We prefer to remain on the sidelines as we await more visibility in the current environment,” he concluded.
While TD Cowen analyst David Kwan thinks Enghouse Systems Ltd.’s (ENGH-T) “attractive dividend/FCF yields and pristine balance sheet should provide downside support,” he warns investors “sustained share price appreciation will be difficult, mostly due to its negative organic growth that is unlikely to materially change in the near-term/medium-term in our view given ongoing macro headwinds and elevated competitive/AI risks.”
Acknowledging last week’s release of its third-quarter results displayed “some” sequential improvements, he still sees the outlook for Markham, Ont.-based software company remaining “murky.”
“ENGH noted improvements in churn and renewal activity in Q3, which along with the weaker Canadian dollar, helped revenue increase quarter-over-quarter for the first time in a year,” Mr. Kwan said. “However, ENGH also stated that the demand environment remains challenging given the macro uncertainty while it is still seeing increased pricing pressure in certain markets. For example, ENGH noted that in the contact center market, many competitors remain aggressive on pricing to help preserve revenue, cover costs, and service debt. ENGH also noted weaker telco spending as a headwind to the AMC business.
“AI is creating more uncertainty than opportunities for monetization. ENGH indicated that the weakness in its contact center business is not being primarily driven by AI but instead by aggressive pricing from (larger) competitors. That may be true now, but we believe (Gen)AI solutions represent a more material risk to ENGH from a competitive standpoint but also from a monetization standpoint, as revenue models are evolving away from seat-based licenses and management noted the difficulty in monetizing AI in its markets.”
The analyst said Enghouse’s restructuring has led to a “modest” margin improvement with the expectation of “a greater impact expected over time, primarily due to longer notice periods in Europe.”
“Despite the increased restructuring activity, ENGH thinks Adj. EBITDA margins are likely to remain in the mid-20-per-cents, compared to the high-20-per-cents to 30 per cent over the past decade, due to the revenue challenges it is facing, as it remains focused on matching its costs to revenue,” he added.
“Removing future M&A from our forecasts. F2027 revenue/Adj. EBITDA forecasts have decreased by ~7%/~9%, primarily due to the removal of future M&A from our estimates given the challenging environment.”
With an increases to peer valuations, Mr. Kwan increased his target for Enghouse shares to $17 from $16, keeping a “hold” rating. The average is $18.
“Our neutral view is primarily due to the continued elevated organic revenue declines in both its IMG and AMG businesses, particularly driven by macroeconomic/geopolitical headwinds to its mostly SMB customer base in IMG, AI/competition challenges in its contact center/customer experience business, and headwinds in the telco sector. This is offset by ENGH’s strong balance sheet that could fund more active share buybacks and M&A activity,” he said.
In other analyst actions:
* National Bank’s Doug Taylor raised his target for The Descartes Systems Group Inc. (DSGX-Q, DSG-T) to US$100 from US$95 with an “outperform” rating.
“FQ2 reinforced our view that Descartes can sustain high-single-digit organic growth and compound it through disciplined M&A while maintaining exceptional margins, warranting a premium valuation,” he said. “We maintain our Outperform rating and bump our target toUS$100(wasUS$95), reflecting model roll and as we bake in recent strong capital deployment. This equates to an unchanged 17.5 times NTM+1 EBITDA. Descartes remains a top idea in our coverage universe.”
* Stifel’s Martin Landry lowered his target for GURU Organic Energy Corp. (GURU-T) by $1 to $4 with a “hold” rating. The average is $3.12.
“GURU reported better than expected Q3FY26 results, with revenue of $11.5-million and positive adjusted EBITDA of $0.9-million versus our forecast of a $0.2-million loss,” said Mr. Landry. “Excluding last year’s one-time change in estimate tied to the termination of the Canadian exclusive distribution agreement, revenue grew 27 per cent year-over-year, with Canada up 19 per cent year-over-year. In the U.S. revenues increase a strong 60 per cent year-over-year on the nationwide Sprouts launch that went live June 22. Concurrently to the earnings release, the company announced that Carl Goyette is concluding his tenure as President and CEO, with Chairman Tyler Ricks serving as Executive Chair while the Board searches for a successor. This change was unexpected and the reasons for the change not clear. However, Mr. Goyette leaves at a time when the company seems to be gaining some momentum with improved profitability and sales breakthrough in the U.S., mitigating the transition risks, in our view.”