Inside the Market’s roundup of some of today’s key analyst actions
RBC Dominion Securities analyst Pammi Bir thinks Primaris Real Estate Investment Trust (PMZ.UN-T) is “punching above its weight class” and warns investors “do not let its small cap size catch you off-guard.”
“PMZ ticks a lot of our preferred boxes,” he said. “The combination of its unique strategic positioning in retail, superior growth profile, below-average leverage, and discounted valuation should appeal to a broad investor base.”
In a research report released Monday, Mr. Bir initiated coverage of the Toronto-based enclosed shopping centre-focused REIT with an “outperform” recommendation, touting its unique strategy “with levers to drive multiple up.”
“PMZ is the only Canadian REIT strategically focused on consolidating mall ownership in Canada,” he said. “As large institutional owners rebalance their portfolios toward other property types, PMZ is a natural buyer with limited competition. Specifically, PMZ is targeting more than $1-billion of acquisitions over the next three years and is already a third of the way there. As its size, diversification, and asset quality improve, we see levers to support multiple expansion.”
The analyst sees Primaris’ growth ranking above its peers, saying it is “doing it our preferred way with among sector’s best balance sheets.”
“Our 5-per-cent 2024-26 estimated FFOPU CAGR [funds from operations per unit compound annual growth rate] exceeds its retail peers (2 per cent) and the sector (4 per cent), while our 7-per-cent 1YR FWD NAVPU [one-year forward net asset value per unit] growth is slightly ahead of its retail comps (6 per cent),” he said. “Our growth is mainly organic driven, with 3-4-per-cent annual same-property NOI from recovering occupancy, decent renewal spreads, & conversion of pandemic era leases to traditional structures. PMZ’s low payout ratio also sets it up for above peer average distribution growth. Unit repurchases could also yield upside to our calls.
“PMZ’s acute focus on maintaining low leverage provides stronger relative insulation from earnings and NAV erosion risks amid potentially rising rates. Note, our 6 times 2024 estimated debt/EBITDA is well below its retail peers (8 times) and the sector (9 times). Its low leverage and payout ratio create financial flexibility to continue repurchasing units, pay down debt, fund acquisitions, and/or raise distributions. As well, debt maturities are largely addressed through 2026.”
In justifying his bullish stance, Mr. Bir also reassured investors “the mall is not dead: indeed, fundamentals are alive.”
“After a rough period in 2015-2020 (department store failures, e-commerce headwinds, COVID), tenant demand is recovering well at better quality centres, particularly with muted new supply. While an easing economy and drop-off in immigration tailwinds could create some downside risks, tenants are still catching up with the significant population driven demand growth of recent years,” he said.
Seeing Primaris’ discounted valuation presenting “an attractive entry,” the analyst set a target of $19 per unit. The average target on the Street is $18.11, according to LSEG data.
“PMZ is trading at 23 per cent below our $21 NAVPU (9.3-per-cent implied cap rate, 14 times 2025 estimated AFFO), well below its CDN retail peers (10-per-cent NAV discount) and U.S. comps (4-per-cent NAV premium),” he said. “Our $19 PT is based on an 18-per-cent discount to our $22.50 1YR FWD NAVPU. We believe our target valuation is supported by PMZ’s above average earnings and NAV growth profile, below average leverage, improvements in portfolio quality, and further anticipated strong execution.”
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Seeing a “stronger” financial position and improved earnings per share growth outlook, CIBC World Markets analyst Mark Jarvi upgraded Emera Inc. (EMA-T) to “outperformer” from “neutral” previously.
“We believe the upcoming Tampa Electric rate case decision on Dec. 3 and investor day on Dec. 4 will affirm that Emera (EMA) is on a better path forward, including a material step up in EPS in 2025,” he said.
“We believe EMA will deliver stronger EPS growth over the next two years (9-per-cent 2-year CAGR) vs. weak EPS results since 2022 (negative 4-per-cent 2-year CAGR) given de-leveraging efforts are largely complete, benefits of rate increases at key utilities and tailwinds from a strong US$. We should get the final outcome of the rate case for Tampa Electric (55-60 per cent of EMA’s earnings) on Dec. 3. Recent utility commission staff recommendations point to a fairly positive outcome. The staff recommend at 10.3-per-cent authorized ROE up from the 10.2 per cent currently — we assume the commissioners adopt this ruling (but could nudge the ROE higher). Regardless, new rates will help EMA on the achieved ROE at Tampa Electric and generally in the first year of new rates, Tampa Electric can exceed its authorized ROE (we assume a 10.4-per-cent earned ROE in 2025).”
Mr. Jarvi expects few surprises from the company’s Investor Day event on Dec. 4 in Toronto, seeing the potential to “highlight progress.
“Overall, we do not expect any surprizes to the capital plan or growth targets,” he said. “We believe EMA will provide 5-year capex and rate base projections, vs. historically 3-year projections. We do not expect a material impact on the rate base CAGR (currently 7.5-per-cent 3-year CAGR and back in June EMA said it can deliver a 7-8-per-cent 5-year CAGR). We believe EMA will keep its 3-year (2024-27) target Adj. EPS CAGR of 5-7-per-cent and dividend CAGR of 1-2-per-cent (i.e., won’t give a 5-year projection), supporting a declining payout ratio (closer to 80 per cent in 2027). Further, we expect EMA to highlight progress on deleveraging, more financial flexibility and try to frame an improving outlook at NSPI (expect a new rate case in ‘25 and increasing ROE in ‘26).”
He increased his target for Emera shares to $58 from $54. The average is $54.57.
“Our new target and EMA’s above-average dividend yield (could be more prized as rates drop), implies a total return to target of 14 per cent, above what we believe investors can earn from EMA’s closest peers,” the analyst said.
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In research notes released Monday, two more companies were named to TD Cowen’s “Best Ideas 2025″ list.
Analyst Cherilyn Radbourne added Brookfield Corp. (BN-N, BN-T), calling it “good stewards of capital” and seeing “macro headwinds turning to tailwinds.”
“BN has a long track record of being a strong compounder of earnings/value, in our view,” she said. “The company owns 73 per cent of Brookfield Asset Management (BAM), which is targeting to compound DE [distributable earnings] at an 18-per-cent CAGR [compound annual growth rate] during 2024-2029 and is a global leader in renewables/transition/infrastructure investing, all areas of high growth and increasing LP allocations. BN’s wealth solutions business has grown to $115-billion-plus of AUM [assets under management] in just 2-3 years and is targeting $300-billion by 2029. Carried interest should be poised to inflect meaningfully higher in 2025-2027+, as deal velocity re-accelerates following a quiet two-year period.
“Investor sentiment regarding the on-balance-sheet real estate portfolio has bottomed and is on the upswing. In our view, there is still substantial unrecognized value in BN’s share price.”
Ms. Radbourne has a “buy” rating and US$74 target for Brookfield’s U.S.-listed shares. The average on the Street is US$63.24.
“BN’s franchise has been resilient over the past two years despite headwinds that are becoming tailwinds, as interest rates decline, and transaction velocity re-accelerates,” she added. “Q3/24 DE before realizations was a record $0.80/share, on a 23-per-cent increase in fee-bearing capital and a doubling of wealth solutions earnings. Realized carry will probably lag a bit but should re-accelerate in 2025-2027+.”
Analyst Brian Morrison sent Gildan Activewear Inc. (GIL-N, GIL-T) to the list, seeing it “sticking to core strength to drive market share.”
“With its contentious proxy battle in the rearview, Gildan management is now focused on attractive growth potential through market share gains within Fleece/Ringspun/National Accounts,” he said. “With new textile capacity and an expansion of vertical integration initiatives within yarn spinning, we anticipate 2025 to demonstrate attractive EPS growth and FCF, that should lead to multiple expansion.”
Mr. Morrison raised his target for Gildan shares by US$2 to US$60, reaffirming a “buy” recommendation. The average is
“We believe Gildan effectively operates in a commodity based industry inclusive of having the lowest cost structure of its peers. This is due to its centrally located manufacturing facilities, vertical integration, and optimization of its cost structure. Having achieved significant market share in the North American Basics segment, its capacity expansion enables it to stick with its core strength of utilizing its cost structure advantage to drive market share gains in other targeted verticals. This should result in strong FCF that we anticipate to be allocated toward its NCIB. These factors should result in attractive EPS growth over the mid-term, that combined with improved governance at the Board level and a motivated management team, has the potential to drive multiple expansion toward/above its historical average.”
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Citi’s Paul Lejuez expects Lululemon Athletica Inc. (LULU-Q) to post a third-quarter fiscal 2025 earnings beat driven by a “strong” performance internationally, however he expects “weak” U.S. trends to linger.
Ahead of Thursday’s release of its financial results, the equity analyst raised his earnings per share forecast by 6 US cents to US$2.79, which is 11 US cents higher than the current consensus. It’s a gain of 26 US cents from the same period a year ago.
“We anticipate 3Q Americas comps of negative 2 per cent to show no meaningful improvement in trends vs 2Q as weak category trends weigh on demand,” he said. “Given management’s plan not to promote more to drive sales, we expect GM in line with cons. We expect mgmt to flow through the 3Q beat, raising F24 guidance by 5 cents at the mid-point, implying 4Q guidance relatively in line with cons. Stronger int’l sales/tight expense control likely limit downside to F24 EPS; however, we anticipate weaker U.S. trends to persist into F25, which will make it difficult for LULU to grow earnings.”
Mr. Lejuez also kept his full-year 2025 estimate of US$13.59, which is “well below” the Street’s projection of US$14.95, citing “a more negative view on Americas comp trends next year (down 2 per cent vs consensus flat).”
“We believe LULU’s U.S. business is being negatively impacted by overall weak category trends driven by a consumer shift in preference toward traditional fashion, away from athleisure,” said Mr. Lejuez. “We believe this dynamic will make it more difficult for LULU to drive a meaningful improvement in U.S. comps near-term without having to get more promotional (which, based on our conversations with mgmt, we do not expect it to do).
“Additionally, the competitive environment has gotten more intense recently. Alo (women’s fashion athletic), Vuori (primarily men’s lounge) and Rhone (men’s performance lifestyle brand) have grown rapidly in recent years. URBN’s Free People Movement, A&F’s YPB, Old Navy’s active line and TGT’s All-in-Motion line are formidable competitors that have grown as a group. Given this step-up in competition and likelihood of higher promos (given weaker category trends and customers preference for value), we believe it will be more difficult for LULU to drive full-priced comps this holiday and into F25.”
While emphasizing investor attention has been on Lululemon’s “issues” in the United States, he thinks most are still expect very strong growth in international markets, particularly in China.
“We believe trends in China, in particular, remain strong and we expect a comp beat in the region (up 25 per cent vs cons up 23 per cent), driving an overall modest comp beat in 3Q,” he said. “Stronger international sales may help to offset weakness in the U.S.; however, without the core U.S. market growing, we believe LULU’s multiple will remain pressured.”
Mr. Lejuez kept a “neutral” rating and US$270 target for the Vancouver-based company’s shares. The average on the Street is US$320.47.
“Shares are up 37 per cent vs the low reached in early Aug and are trading at an F25E P/E multiple of 23.5 times, which we believe implies slightly unfavorable risk/reward,” he said.
“We rate shares of lululemon as a Neutral. After years of benefitting from outsized growth in active apparel, trends in the category have slowed in F24 with data in Yoga & Active apparel pointing to a further decel 2Q QTD vs 1Q (which was a big decel vs F23). This dynamic, coupled with LULU’s execution issues (lackluster product assortment/lack of color/sizing) leave LULU more susceptible to increased competition and promotional pressures in 2H24/F25. We believe category weakness and a tougher macro backdrop makes it unlikely LULU sees a reacceleration in U.S. trends in 2H. Additionally, while LULU has performed extremely well in China over several years, incremental weakening of the China consumer environment is an added risk to the stock (as expectations remain high on China growth).”
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Ahead of the release of its second-quarter 2025 financial results, BMO Nesbitt Burns analyst Tamy Chen continues to predict “a gradual recovery” for Empire Co. Ltd. (EMP.A-T).
She’s currently projecting earnings per share of 68 cents for period, falling 3 cents from her previous estimate on a slightly higher expense expectation. The Street’s forecast is 67 cents.
“Our [same-store sales estimate] of 1 per cent is unchanged and similar quarter-over-quarter,” he said. “Focus will be if the incrementally better consumer behaviour seen last quarter has sustained this quarter.”
“Management attributed last quarter’s better-than-expected comp to early signs of a slightly better consumer as food inflation stabilizes and interest rates begin to come down. The company emphasized this trend would be gradual, which is consistent with other data points we have recently seen. The near-term cadence of our SSS is up 1 per cent in FQ2/25E, up 1.5 per cent in FQ3/25E, up 2 per cent in FQ4/25E.”
Seeing Empire’s valuation discount sitting larger than historical baselines, Ms. Chan raised her target for its shares by $2 to $44, keeping a “market perform” rating. The average target is $44.13.
“EMP is trading at 13 times our 1-year forward EPS and 12 times our 2-year forward vs. Loblaw (L, $181.70) So, EMP’s discount is 5-6 turns vs. the historical 3-4 times,” she said. “For some investors, the bull thesis is valuation should narrow as SSS gradually normalizes. While Loblaw and MRU should also see any normalization of consumer tradedown in its conventional banners, EMP’s 90-per-cent conventional mix may see stronger SSS on weaker laps. The counterargument is there remains significant uncertainty on the shape of a potential consumer recovery next year. Also, EMP has limited pharmacy exposure and this segment continues to see significant accretive growth. For a number of factors, we forecast 7-9-per-cent EPS growth in F2026E and F2027E for EMP vs. 8-10 per cent for Loblaw and 9-11 per cent for MRU over a similar time period ... We list some potential catalysts that, if they occur, would present a much stronger fundamental case for EMP’s discount to narrow, in our view. These potential catalysts include more consistent SG&A performance, further banner optimization and/ or further rationalization of the Voila CFC drag beyond what has been announced so far.”
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Following the release of “weak” third-quarter results, RBC Dominion Securities analyst Nelson Ng thinks the outlook for Green Impact Partners Inc. (GIP-X) remains “binary” on whether its flagship Future Energy Park project “achieves financial close (and project economics).”
On Friday, the Calgary-based company revised their anticipated financial close date for FEP, which is clean energy project connecting Alberta’s agriculture and energy sectors, to early 2025 from late 2024 previously, and now see construction potentially starting in the second quarter of next year.
“GEP’s Engineering, Procurement, and Construction (EPC) costs are now estimated at $1.5 billion (up from previous guidance of over $1.2 billion), and GIP is forming a consortium to manage risks and dividing the work into two contracts (engineering/procurement and construction),” said Mr. Ng. “Management anticipates funding the project with 25-per-cent equity and 75-per-cent senior and junior debt, and once completed and fully ramped-up (approximately three years after financial close) management estimates the facility will generate EBITDA of $370-490-million (compared to previous guidance of over $300-million), reflecting a 3-4 times EBITDA build multiple.”
Also suffering through ramp-up issues at its GreenGas Colorado dairy-to-pipeline project, Mr. Ng lowered his 2024 and 2025 Adjusted EBITDA estimates to a loss of $2.9-million and a profit of $7.6-million (from $0.8-million and $8.0 million), respectively. He said the cuts “primarily reflect weaker- than-expected Q3/24 results and the delayed production ramp at the Colorado RNG facility.”
“We introduce our 2026 Adjusted EBITDA estimate of $10.9 million, which reflects the full run-rate contribution from Colorado,” he added.
Keeping an “outperform” rating, he reduced his target for its shares by $1 to $8. The average is $7.81.
Elsewhere, Canaccord Genuity’s Yuri Zoreda cut her target to $6 from $9 with a “speculative buy” rating.
“Delays continue to impact GIP’s first RNG project, Colorado, while the timeline for financial close of the company’s flagship project, Future Energy Park (FEP), keeps getting pushed back,” she said. “However, with FEP apparently at the cusp of achieving financial close, we see more upside than downside potential for the stock price at this juncture. GIP trades at 19.5 times EV/EBITDA (2025E) on numbers that reflect below trend EBITDA for Colorado and do not include contributions from FEP. The multiple comes down to 10 times on run-rate EBITDA for Colorado vs. peers trading at 8.4 times, implying that investors are ascribing little value to the $1.5-billion FEP project. The 62-per-cent total return implied by our target justifies our SPEC BUY rating.”
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In a quarterly earnings review for precious metals companies titled Under Pressure, But Don’t Stop Believin’, CIBC World Markets analysts reaffirmed their view “Trump is good for gold.”
“Since our last commodity update on July 8, Guess Who’s Back, the market has seen a massive gold rally (adding to the significant uptrend in H1/24), the result of a combination of the long-anticipated first rate cut, and the market’s realization that Trump had a shot at winning the election,” the analysts said. “2024 has seen an unprecedented 27-per-cent increase in bullion prices year-to-date, benefitting from the Fed’s overall easing cycle, geopolitical unrest/risk caused by the Israel-Hamas war and Russia-Ukraine crisis. Retail demand has picked up over the past year with global gold ETF inflows turning to the positive in Q3/24 as investors sought safe-haven assets amidst geopolitical uncertainty.
“President-elect Donald Trump’s victory in the U.S. election on November 5 brought on a rather surprising pullback in the gold price, with the U.S. dollar strengthening on the view that he will be pro-business and anti-regulation, which would be a favorable environment for equities. We say surprising because we retain the view that tariffs, tax cuts, and testing the independence of the Fed, all bode well for gold. Though we really shouldn’t be surprised; Trump-euphoria caused a similar selloff in gold in 2016. It may take a few quarters, but reality will eventually set in on inflationary pressures, and while this may ultimately cause the rate cutting environment to come into question, we believe wealth preservation and flight to safety for non-U.S. based investors and central bankers will continue to support gold prices well into this decade.”
After raising their gold and silver price projections through 2028, the analyst made a trio of rating changes:
* Anita Soni upgraded Iamgold Corp. (IAG-N, IMG-T) to “outperformer” from “neutral” with a US$7.60 target, up from US$6.40 and above the US$6.66 average.
“Over the past year, IAMGold has started up flagship asset, Cote Gold, in Northern Ontario, and has begun the process of debottlenecking the asset. There are a number of issues which the company needs to address in the upcoming quarters, including a move to direct ore feed, ensuring that the pit keeps up with the mill, and debottlenecking the mill. However, we believe that the current share price represents an attractive enough entry point, acknowledging that there maybe some inevitable better timed down dips in share price on the ramp-up headwinds mentioned above. With Essakane generating significant FCF and Westwood now swinging to FCF positive, we see IAMGold as an attractive takeout candidate in 2025 for the ownership interest in Cote. As long as the Cote orebody presents no major negative surprises, in our experience, ramp-up issues such as mill fixes and mining rate sluggishness are usually fixable issues that a senior company will factor into its bid price. Canada remains a very attractive mining jurisdiction, and Cote has significant exploration potential,” she said.
* Bryce Adams lowered i-80 Gold Corp. (IAU-T) to “neutral” from “outperformer” with a $1.30 target, down from $3.80 and below the $2.99 average.
“In mid November, new management of i-80 Gold announced a new strategy that included a focus on gold assets, deferring base metals potential at Ruby Hill and the Lone Tree autoclave refurbishment, as well as building out five mining assets within this decade. The stock traded poorly on this update, and in our first look publication we noted that, in our view, a simpler strategy could have been better received by the market. After the initial negative market reaction, the stock has partially rebound. We see upside in the stock and our new price target has a strong return to target, but our new downside scenario is C$0.00 and largely depends on the company’s ability to refinance its capital structure. We expect improving visibility on the development plan by mid-2025, once balance sheet has been recapitalized and new PEA reports for the asset base have been filed,” he said.
* Cosmos Chiu downgraded Gatos Silver Inc. (GATO-N) to “tender” from “outperformer” with a US$16 target, down from US$19. The average is US$15.29.
“We had upgraded Gatos Silver shares to Outperformer on May 21, 2024, when shares were at $12.32/sh. With First Majestic announcing its acquisition of Gatos Silver on September 5, 2024, shares subsequently peaked at $19.99/sh in late October, as a result of the takeout offer, the potential for interlopers, as well as tailwind from a strengthening silver price. Almost three months has now passed since the initial announcement, and we believe that the potential of an interloper has significantly decreased. With that, we are changing our rating from Outperformer to Tender, and decreasing our price target from $19.00 to $16.00. The deal is expected to close in Q1/25,” he said.
Target price adjustments include:
- Agnico Eagle Mines Ltd. (AEM-N/AEM-T, “outperformer”) to US$116 from US$102. Average: US$96.70.
- Alamos Gold Inc. (AGI-T, “outperformer”) to $40 from $38. Average: $34.06.
- Franco-Nevada Corp. (FNV-T, “outperformer”) to $245 from $235. Average: $206.70.
- Kinross Gold Corp. (KGC-N/K-T, “outperformer”) to US$13 from US$12. Average: US$12.03.
- Wheaton Precious Metals Corp. (WPM-N/WPM-T, “outperformer”) to US$85 from US$82. Average: US$73.23.
“Our top picks in the sector remain Agnico Eagle, Kinross Gold, Pan American Silver and Wheaton Precious Metals,” they said.
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In other analyst actions:
* Stifel’s Ingrid Rico cut her Barrick Gold Corp. (ABX-T) target to $32 from $33.50 with a “buy” rating. The average is $34.35.
“Last week, Barrick hosted its Investor Day and rolled out a new 5-year outlook,” she said. “The prior 2022 Investor Day had higher overall production expectations, particularly at NGM, that Barrick hasn’t been able to achieve. Overall, the session serves as a recalibration of expectations after some notable operating challenges (NGM and PV Expansion). Management reiterated commitment to unlocking further value from its portfolio + achieving organic production growth; however, near-term, production is flat with higher capex. In our view, the recalibration of expectations is a much-needed element for a path toward regaining investors’ favourable sentiment and conviction in the name. We are lowering our target price to $32.00 but don’t lose sight of ABX’s cashflow generation tied to a number of Top Tier assets. Operational setbacks + higher reinvestment have obscured the investment thesis but we believe improving depressed valuation + higher conviction in go-forward FCF can come from improving operational performance.”
* Following its third-quarter results and site visits last week to its Sabodala/Massawa mine in Senegal and Lafigué in Côte d’Ivoire, Canaccord Genuity’s Carey MacRury trimmed his Endeavour Mining PLC (EDV-T) target to $52 from $56 with a “buy” rating. The average is $43.48.
“2024 has been a challenging year for the company with unexpected management changes and operational challenges at Sabodala/Massawa,” he said. “That said, the new Massawa BIOX circuit is ramping up well, Lafigué looks poised to outperform nameplate in the near future, and both projects were completed on time and on budget. We also see significant exploration potential across the portfolio, and the FCF inflection story remains intact, in our view, with a significantly improved Q4 and into 2025 expected. Finally, the company expects to release its PFS for its Tanda-Iguela (Assafou) project in Côte d’Ivoire in the coming weeks, which looks poised to become a cornerstone asset with more than 300koz per year expected and it likely to be the company’s next development project. Endeavour remains one of our top picks based on its near and longer-term growth profile, FCF transition, capital returns, exploration track record, and inexpensive valuation.”
* Stifel’s Stephen Soock raised his target for Orla Mining Corp. (OLA-T) to $9.75 from $8 with a “buy” rating. The average is $8.07.
“Orla Mining recently announced acquisition of Musselwhite mine in Canada from Newmont,” he said. “This transaction significantly reduces the company’s concentration and geographic risk plus adds an asset with huge reserve addition runway. We are comfortable modeling robust reserve additions at Musselwhite given the well-established geologic continuity of the orebody, drilling data points down plunge on the main structure and opportunities along other limbs of mineralization. The additions of Musselwhite puts Orla with 320koz/yr production generating FCF of $515-milllion over the next 3 years (at spot gold) to fund development the South Carlin and Camino Rojo Sulphides projects, pay down the RCF plus support regional exploration across the portfolio that will leverage the existing and planned infrastructure. We are increasing our target P/NAV multiple by 5pbs to 1.0x given the asset diversification and upping our target price.”
* After hosting a day of investor meetings, Eight Capital’s Adhir Kadve raised his VerticalScope Holdings Inc. (FORA-T) target to $18 from $15 with a “buy” rating.
“Discussions largely centered on VerticalScope’s organic and inorganic strategy moving forward and included a more direct sightline to potential data licensing deals,” he said. “We came away from the day incrementally more positive on VerticalScope’s prospects moving forward; as such, we are moving to a Street high of $18.00/share TP. We continue to see a catalyst rich outlook for VerticalScope, including execution on low double-digit year-over-year organic growth in F25 and potential announcements surrounding data licensing deals, which we believe would re-rate shares. With FORA trading at 5.5 times F25E adj. EBITDA, we see compelling risk/reward on shares.”