A new weekly look at some small-cap stocks making news - or about to.
As of midday trading on Thursday, Feb. 6, Canada’s S&P/TSX SmallCap Index was up about 19 per cent over the past 12 months. The Russell 2000 in the U.S. was up about 18.5 per cent over the same period.
Small-cap spotlight
Here’s one small cap in Canada that investors may want to put on their radar screen.
Canopy Growth Corp. (WEED-T; CGC-Q) shares sank by nearly 25 per cent in early trading on Friday after the cannabis company reported a larger loss than expected. It reported a loss of $121.9-million or $1.11 per share for the quarter ended Dec. 31, which was more than the loss of 54 cents per share expected by analysts, according to Refinitiv Eikon data.
The loss was an improvement from a loss of $216.8-million or $2.62 per share a year earlier. Net revenue came in at $74.8-million, down 5 per cent from $78.5-million a year earlier. The expectation was for revenue of $69.2-million. Adjusted EBITDA was a loss of $3.5-million, which the company said was a 61-per-cent improvement from a loss of nearly $9-million for the same quarter a year earlier, driven by benefits from its cost-savings program.
In a conference call with analysts, recently appointed chief executive officer, Luc Mongeau, cited challenges in the cannabis market, such as regulations not moving as quickly as expected, slow uptake of the cannabis beverage market, continued competition from the illegal cannabis industry and the uncertain path to full legalization in the U.S.
“But for me, this is the exciting part,” said Mr. Mongeau, who was appointed CEO in November, after about two years on the board and took over officially on Jan. 6.
“The opportunities ahead are just beginning to unfold,” he said, adding that more consumers are moving away from alcohol and choosing cannabis to “enhance their social life and support their wellness. This shift in behaviours is not just a passing trend; it’s a sign of deep, lasting change that will only continue to grow.”
He said his focus is to “drive Canopy rapidly towards sustained profitability and positive cash generation.”
Mr. Mongeau said he’s working with the team to find “key areas of improvement” and vowed to discuss more at the company’s next conference fall in May.
The initial reaction to Canopy’s results was in stark contrast to the surge in shares of Aurora Cannabis Inc. (ACB-T; ACB-Q) earlier this week. Aurora stock rose more than 50 per cent on Wednesday after reporting record quarterly results before markets opened, including a 37-per-cent year-over-year rise in revenue to $88.2-million (beating expectations of $80-million) and a profit of $31.2-million compared with a loss of $17.1-million in the prior-year period. The stock rose another 17 per cent on Thursday, after Aurora announced a supply agreement with SNDL Inc., a Canadian licensed producer, valued at $27-million. Aurora stock was trading up 2 per cent in early trading Friday.
Small-cap summary:
Other small caps making news this week
Converge Technology Solutions Corp. (CTS-T) shares soared more than 50 per cent in early trading Friday after the company announced a deal to be taken over by Miami-based private equity firm H.I.G. Capital for $5.50 per share. The purchase price values the company at $1.3-billion, according to the release. The deal is a premium of 56 per cent to Converge’s closing price on Feb. 6. Converge will be delisted when the deal closes, the company said.
Converge will join the current H.I.G.-owned entity, Mainline Information Systems, LLC based in Tallahassee, FL. Converge CEO Greg Berard will serve as CEO of the combined business, while Mainline CEO Jeff Dobbelaere will become president.
Converge said it plans to release preliminary fourth-quarter results on Feb. 10. It said gross profit and adjusted EBITDA are expected to be at the high end of its previously provided range of gross profit of $165-million to $178-million and adjusted EBITDA of $36-million to $47-million.
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Calian Group Ltd. (CGY-T) shares rose by as much as per cent on Thursday after the company announced it signed more than $50-million in new and renewed multi-year defence contracts in the first quarter of fiscal year 2025.
The company said the contracts highlight “the continued need for mission-critical defence solutions and the value Calian provides to Canada’s defence, NATO and our allies.”
“We believe CGY is uniquely positioned to benefit from the increases in government defence spending in Canada, the U.S., and abroad,” Acuman Capital analyst Jim Byrne wrote in a Feb. 6 note. He has a “buy” and $70 price target on the stock.
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Rogers Sugar Inc. (RSI-T) reported first-quarter revenues rose 12 per cent year-over-year to $323.2-million due to higher prices and sales in its sugar segment and higher sales volume in its maple segment. The results were ahead of analysts’ expectations of $303.8-million, according to S&P Capital IQ.
Net earnings came in at $15.8-million or 11 cents per share versus $13.9-million or 11 cents a year earlier. Adjusted earnings came in at $19.5-million or 15 cents per share compared to $12.6-million or 12 cents per share for the same period last year. The expectation was for adjusted EPS of 16 cents.
In its outlook, the company stated that it has been reviewing “strategies and steps to mitigate the potential adverse impact of such tariffs in the event that they are imposed.”
BMO Capital Markets analyst Stephen MacLeod said in a Feb. 6 note that tariffs threats are looming for the company.
”While there are few near-term alternativesto supply the U.S. market’s sugar and maple needs, the risk introduces uncertainty,” he wrote, adding that Rogers Sugar exports about 5 to 10 per cent of its sugar production to the U.S. and many of its industrial customers sell products with sugar ingredients into the U.S. (He said 40 to 50 per cent of sugar-contained products in Canada are exported to the U.S. and about 50 per cent of Canadian maple syrup is sold into the U.S.). He maintained his “market perform” rating (similar to hold) and a lowered his target price to $6.50 from 7.
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Lightspeed Commerce Inc. (LSPD-T) has abandoned a potential sale process and will instead buy back US$400-million worth of shares, equal to roughly 18 per cent of its float, bucking a recent trend that has seen a slew of Canadian technology companies exit the public markets. For the full report from technology reporter Sean Silcoff, including the company’s latest earnings results, click here
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National Bank Financial analyst Zachary Evershed expects to see Boyd Group Services Inc. (BYD-T) benefit from the tailwind of poor winter weather when it reports fourth-quarter 2024 results in mid-March.
“With the mild winter last year having weighed on Q1/24 SSSG [same-store sales growth], we look to precipitation data to drive our estimate revisions,” he said in a report. For more details, see David Leeder’s analyst upgrades and downgrades report here.
Boyd Group was also one of CIBC’s chief market technician Sid Mokhtari’s top 10 stock recommendations this month based on his screening process. See what he has to say about the stock in a recent interview with Jennifer Dowty here.
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Canaccord Genuity Group Inc. (CF-T) reported revenue of $451.3-million for its third quarter ended Dec. 31, up about 16 per cent versus $389.5-million a year earlier. The expectation was for revenue of $447.5-million in the latest quarter, according to S&P Capital IQ estimates.
Canaccord said its global wealth management revenue increased by nearly 20 per cent year-over-year to $233.4-million. Global capital markets revenue increased by 11 per cent year-over-year to $210.7-million.
The company reported a net loss attributable to common shareholders of $25.4-million or 26 cents per share compared to net income of $14.3-million or 14 cents a year ago. Excluding “significant items,” the company reported net income of $17.1-million or 17 cents per share compared to $20.8-million or 20 cents per share a year earlier. The expectation was for EPS of 24 cents per share.
TD Cowen’s Graham Ryding downgraded Canaccord to “hold” from “buy” with a $10 target, down from $12. The average is $11.83.
“Results were below our forecast despite in-line revenue, and compensation being lower than our forecast. Non-compensation expense was elevated (real estate and regulatory compliance is elevated, but not expected to be the run rate). We have lowered our estimates,” he said.
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Andrew Peller Ltd. (ADW-A-T; ADW-B-T) shares were up 4 per cent in Thursday trading after the alcohol company reported revenue of $105.4-million for its third quarter ended Dec. 31, up 5.2 per cent from $100.2-million in the prior year. In its report release after markets closed on Wednesday, Andrew Peller said net earnings of $7.7-million or 18 cents per Class A share compared to a net loss of $400,000 or a penny per Class A share in the year-earlier quarter.
Acumen Capital analyst Nick Corcoran said the sales exceeded his estimate of $102.7-million and consensus of $101.5-million.
“The variance to our estimate was largely due to outperformance of big box stores, a new sales channel, partially offset by a decrease in ADW’s retail stores,” he wrote in a Feb. 6 note. “The company appears to have successfully navigated the early stages of changes to the retail distribution landscape in Ontario.”
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Stingray Group Inc. (RAY-A-T; RAY-B-T) rose by as much as 9 per cent in combined Wednesday and Thursday trading after the company said its third-quarter revenues rose 8 per cent to $108.2-million compared to the same quarter a year earlier. The results were above analysts’ expectations of $106.7-million, according to S&P Capital IQ.
The company, which reported after markets closed on Tuesday, said net income came in at $15.7-million or 23 cents per share compared to $9.1-million or 13 per share a year ago. Adjusted net income of $68.7-million or 34 cents per share compared to $69.1-million or 27 cents a year earlier. The expectation was for adjusted EPS of 33 cents.
CIBC analyst Scott Fletcher, who has an “outperformer” (similar to buy) on the stock, increased his target to $11.50 from $11.
“We continue to view Stingray as undervalued, trading at 6.9 times [forward adjusted earnings before interest, taxes, depreciation and amortization] EBITDA and a [free cash flow] FCF yield of 13.2 per cent,” he wrote in a Feb. 5 note.
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Groupe Dynamite Inc. (GRGD-T) shares rose by as much as 14 per cent in combined trading on Wednesday and Thursday after the fashion retailer announced comparable store sales growth of 9.5 per cent for its fourth quarter ended Feb. 1. In a release after markets closed Tuesday, the Montreal-based company also reported comparable store sales growth of 12.3 per cent for the full fiscal year. Groupe Dynamite plans to release its full financial results on or around April 15.
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Allied Properties Real Estate Investment Trust (AP-UN-T) reported rental revenue of $155.1-million for its fourth–quarter ended Dec. 31, up from $150.9-million a year earlier. The expectation was for revenue of $154.3-million.
Funds from operations (FFO) were $74.7-million or 54 cents per unit, down from $85.8-million or 61 cents a year earlier. Adjusted FFO came in at $66.6-million or 48 cents per unit, down from $78.6-million or 56 cents last year. The expectation was for adjusted FFO of 46 cents per unit.
Its net loss was $257.7-million versus a loss of $499.3-million a year earlier.
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Upcoming small-cap earnings:
Feb. 10: Quipt Home Medical Corp. (QIPT-T)
Feb. 11: Cineplex Inc. (CGX-T); WildBrain Ltd. (WILD-T); International Petroleum Corp. (IPCO-T)
Feb. 12: Russel Metals Inc. (RUS-T); Corby Spirit and Wine Ltd. (CSW-A-T, CSW-B-T); First Capital REIT (FCR-UN-T); Precision Drilling Corp. (PD-T); SmartCentres REIT (SRU-UN-T); Acadian Timber Corp. (ADN-T)
Feb. 13: Mullen Group Ltd. (MTL-T); West Fraser Timber Co. Ltd. (WFG-T); Alithya Group Inc. (ALYA-T); Goeasy Ltd. (GSY-T); Tucows Inc. (TC-T); Dye & Durham Ltd. (DND-T); Definity Financial Corp. (DFY-T); Microbix Biosystems Inc.(MBX-T); Calian Group Ltd. (CGY-T)
Feb. 14: MTY Food Group Inc. (MTY-T)
Feb. 14: Boston Pizza Royalties Income Fund (BPF-UN-T)
Feb. 19: Innergex Renewable Energy Inc. (INE-T); Sienna Senior Living Inc. (SIA-T); TFI International Inc. (TFII-T)
Feb. 20: Cascades Inc. (CAS-T); Chorus Aviation (CHR-T): Altus Group Ltd. (AIF-T); Supremex Inc. (SXP-T)
Feb. 24: Spin Master Corp. (TOY-T)
Feb. 26: Element Fleet Management Corp. (EFN-T)
Feb. 27: Pason Systems Inc. (PSI-T); Doman Building Materials Group Ltd. (DBM-T); Trulieve Cannabis Corp. (TRUL-CN)
Feb. 28: Boralex inc. (BLX-T)
March 3: DRI Healthcare Trust (DHT-UN-T); Curaleaf Holdings, Inc. (CURA-T)
March 4: Pet Valu Holdings Ltd. (PET-T)
March 5: Aecon Group Inc. (ARE-T); Thinkific Labs Inc. (THNC-T); BSR Real Estate Investment Trust (HOM-UN-T); KP Tissue Inc. (KPT-T); AirBoss of America Corp. (BOS-T); Automotive Properties Real Estate Investment Trust (APR-UN-T); North American Construction Group Ltd. (NOA-T)
March 6: Ayr Wellness Inc. (AYA-A-CN); TerrAscend Corp. (TSND-T)
March 7: Total Energy Services Inc. (TOT-T)
March 10: Nexus Industrial REIT (NXR-UN-T)
March 11: Dorel Industries Inc. (DII-B-T)
March 13: NFI Group Inc. (NFI-T); Bird Construction Inc. (BDT-T); Ballard Power Systems (BLDP-T)
March 19: Gold Royalty Corp. (GROY-A)