Inside the Market’s roundup of some of today’s key analyst actions
While Air Canada (AC-T) is now forced to battle through a “cloudier” outlook, National Bank Financial analyst Cameron Doerksen sees an intriguing investment opportunity with its shares trading at pandemic levels even after Wednesday’s 10.2-per-cent rally.
“In our view, Air Canada’s share price is reflecting an outlook that is more dire than our updated expectations,” he said. “The current market cap of $5.0-billion is roughly in line with where the stock traded in summer 2020 during the early months of the pandemic when air travel was effectively shut down, with no near-to-mid-term prospects of any rebound, and Air Canada burning through significant cash reserves.”
In a research note released late Wednesday, Mr. Doerksen emphasized U.S. trans-border booking is “not nearly as bad as initially reported,” however he felt it necessary to take “a more conservative view” on his forecast for the airline.
“In addition to tariff chaos-driven recession risk, demand trends on the U.S. trans-border market have moved to the top of the list of investor concerns for the Canadian airline industry and Air Canada,” he said. “Canadians are clearly re-thinking potential travel to the U.S., but the initial media reports of a complete collapse in trans-border demand are not accurate with Air Canada publicly commenting that it is seeing bookings down 10 per cent looking ahead in the next six months. We have heard similar estimates from other Canadian airlines.”
“Lower jet fuel prices are a welcome tailwind, but we have lowered our forecast for Air Canada to reflect weaker economic conditions, reduced demand for U.S. trans-border travel, and heightened competition. For 2025, we now forecast EBITDA of just under $3.1 billion, below management’s current guidance of $3.4-$3.8 billion. Notably, we now forecast RASM [revenue per available seat mile] down 1.2 per cent in 2025 versus up 2.4 per cent previously.”
After incorporating his new assumptions into his model, Mr. Doerksen cut his target for Air Canada shares to $23 from $27, keeping an “outperform” rating. The average on the Street is $23.67, according to LSEG data.
“Although we have lowered our 2025 and 2026 forecasts to better reflect the changed market dynamics and softer demand outlook, we still expect Air Canada to be solidly profitable with leverage remaining comfortable at 2.0 times despite significantly higher capex this year and next (nearly $8.0 billion in cash at the end of 2024),” he said. “Furthermore, with its diverse network (skewing more international today than in 2008-09), attractive premium product and fully-owned loyalty program (which typically generates solid cash flow even in cyclical downturns), Air Canada is much better positioned for a potential slowdown in air travel demand than in 2008-09 and also versus other Canadian airlines today, in our opinion. Indeed, we suspect that some smaller airlines may struggle if market conditions soften significantly, leading to competitive capacity reductions.”
Elsewhere, CIBC’s Kevin Chiang cut his target to $21 from $24 with an “outperformer” rating.
“On AC, we continue to believe there remains pent-up demand for travel in Canada, which helps provide a buffer in the face of the current political/economic uncertainty. AC is also trading at levels not seen since the pandemic,” said Mr. Chiang.
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In response to a recent pullback in its valuation, Stifel analyst Martin Landry upgraded Pet Valu Holdings Ltd. (PET-T) to “buy” from “hold” previously.
“Our change in rating is not warranted by the risk-on trade patterns seen [Wednesday] but rather by Pet Valu’s defensive characteristics and minimal impact from tariffs, combined with a decrease in valuation,” he said. “PET’s valuation has declined to 13 times forward earnings, the lowest level since the IPO and a level where valuation found support in 2023 before rebounding higher.”
While emphasizing economic uncertainty has “likely to have created restrained spending conditions” domestically, Mr. Landry emphasized pet food industry possesses “defensive characteristics supported by humanization trends.”
“From a cost standpoint, we believe that fluctuations in tariffs will have a minimal impact on Pet Valu,” he said. “Roughly 15 per cent of the company’s merchandise is directly imported from the United States. However, at this point Canadian retaliatory tariffs imposed cover a very small portion of this 15 per cent, making the impact of tariffs not material to Pet Valu. Some of Pet Valu’s suppliers, mostly pet food producers, may be impacted by the Canadian retaliatory tariffs on U.S. meat but this does not appear to be a major concern at this point.”
“Over the last 30 years, the market size of the Canadian Pet Food industry has decreased only one year, in 2023, when the industry was comping a strong pull forward from COVID. Hence, the pet food industry has rare combo of growth and defensive characteristics.”
He also thinks the Markham, Ont.-based retailer is “well positioned to capture trade-down patterns with its private label brands,” while expected free cash flow to increase as the company’s capital expenditure cycle is “abating”
“Pet Valu has a strong private label offering, which generates 25 per cent of total system sales,” the analyst said. “These brands are offered at prices 5-20 per cent lower than national brands and could become in higher demand given the ‘Buy Canadian’ movement and also given the frugal consumer. Recently, Pet Valu announced a 15-per-cent price reduction for its Performatrin Prime line of product, increasing the value proposition of the line. As shoppers convert to Performatrin, customer loyalty and retention should increase.”
“Pet Valu’s valuation stands at 13 times forward earnings, the lowest level since IPO and a level which has seen support historically when valuation touched these levels in 2023,” he said. “Over the last four years, PET’s valuation averaged 19 times forward earnings; hence, we are 6 turns below historical averages. Given the volatile trading environment, we believe investors will seek to gain exposure to defensive industries and companies with low earnings volatility.”
“We highlight the following risks to our upgrade. (1) The Canadian economy could stall in 2025 as trade tensions and tariffs impact certain sectors of the economy such as the steel, aluminum and automobile sectors. This could bring PET’s same-store-sales growth toward the lower-end of the company’s range of 1-4 per cent. (2) Online competition increasing. Chewy entered in Canada in 2023 in a measured way, initially selling only to the Greater Toronto Area. The company subsequently extended its geographic coverage to Southern Ontario. Should Chewy extend its distribution nationwide, it could have a negative impact on Pet Valu.”
Concluding “the valuation pullback, combined with a minimal tariff drama, create appealing conditions for investors seeking asylum in these volatile times,” Mr. Landry maintained a $28.50 target for Pet Valu shares. The current average is $32.45.
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National Bank Financial analyst Vishal Shreedhar expects Loblaw Companies Ltd. (L-T) to continue to display “strong” retail food trends when it reports first-quarter 2025 financial results on April 30.
“We forecast FR sssg [Food retail same-store sales growth] of 2.0 per cent, largely reflecting continued strength in discount and positive growth in conventional, as well as modest inflation (StatCan data suggests 2.3 per cent); we expect higher traffic and tonnage,” he said. “Our review of peer commentary suggests: (i) A narrowing sssg gap between discount and conventional, albeit consumer spending remains prudent, and (ii) Cautious commentary from retailers regarding inflation due to tariffs, F/X and commodity input costs, etc.
“We expect Q1/25 Front Store sssg to be positive after declining in the last three quarters, largely reflecting a stronger than usual cough-and-cold season and continued strength in beauty, partly offset by exiting certain electronics categories and lower prices on certain items. We model an increase in quarterly dividend by 5 per cent (to $0.54/share).”
Mr. Shreehar is now projecting quarterly earnings per share of $1.85, a penny lower than the Street’s expectation but up 13 cents from the same period a year ago. He attributes that 8-per-cent year-over-year gain to “positive Food Retail (FR) same store sales growth (sssg), continued growth in Drug Retail (DR), benefits from ongoing growth/efficiency programs, and share repurchases, partly offset by higher costs related to ramp-up of the new D.C. (East Gwillimbury).”
Keeping an “outperform” rating, Mr. Shreedhar increased his target for Loblaw shares to $207 from $192 to reflect a higher multiple and a roll-forward in his valuation period. The average is $199.
“We continue to maintain a favourable view on Loblaw and recommend it as our preferred grocer supported by several key themes: (1) Benefits from management’s improvement initiatives; (2) Ongoing stable EPS growth, and (3) Favourable medium-term trends in discount and drug store (where Loblaw over-indexes),” he said. Major projects for Loblaw include accelerating square footage growth (primarily in discount and Shoppers Drug Mart), ongoing cost reduction efforts (supply chain including new D.C.s, joining a large European buying group, etc.) and other initiatives (freight as a service, retail media, reinvigoration of the right-hand side, etc.).
“On a retail basis, Loblaw trades at 10.1 times our NTM [next 12-month] EBITDA (5-year average is 8.4 times) versus Metro at 11.9 times (5-year average is 11.0 times) and Empire at 7.2 times (5-year average is 6.9 times).”
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Three equity analysts on the Street lowered their recommendations for VerticalScope Holdings Inc. (FORA-T) following a downward revision to their full-year fiscal 2025 guidance that implies a 30-per-cent shortfall in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) compared to the Street’s previous expectation.
Moving his rating for the Toronto-based company to “neutral” from “outperformer” previously, CIBC World Markets analyst Todd Coupland also pointed to “concerns about the macro environment and potential risks posed by new AI search tools.”
“VerticalScope attributed its weakened outlook to a March Google core algorithm update and headwinds faced by its video ads,” he said. “According to the company, Google’s algorithm change occurred between March 13 – 27 and resulted in a 10-per-cemt decline in monthly active users (MAUs) during the month. The company also expects video ads (13 per cent of programmatic ad revenues last year) to experience a Y/Y decline in Q1 due to a change in browser policy (i.e., Chrome) that impacted the performance of its video player and, consequently, compressed video CPMs. These video-related headwinds are expected to continue through the balance of the year.
“Web traffic trends across the aggregate VerticalScope communities we track support our revised revenue forecast. Following a steep reduction in March traffic levels, year-over-year web traffic growth slowed to negative 12 per cent in Q1 (vs. 3 per cent in Q4). April web traffic has only marginally improved from the March decline. Additionally, and in our view, a potential structural risk that merits monitoring is the possibility of web traffic being usurped by AI overlays, such as Google’s ‘Overview’ (released Q2/24), “AI Mode” (testing as of Mar 5), and Reddit’s ‘Answers’ (testing as of Dec 2024). VerticalScope has not seen an impact to MAU that is attributable to these new AI features. The company is also taking proactive measures to adjust to these new realities, including within its SEO strategy and by investing in similar AI tools to improve website performance and the user experience (e.g., improvements in search, translation and thread summaries). Despite this, we still consider it a risk that is worth continuing to monitor.
Mr. Coupland’s year-over-year revenue growth forecast fell to negative 13 per cent for 2025 from a rise of 8 per cent previously, while his 2026 estimate rose to 8 per cent to 6 per cent.
With that change, he dropped his target for VerticalScope shares to $6 from $17. The average on the Street is now $8.88.
“While VerticalScope is an excellent company with a technologically improved platform, to reconsider our view we would need to see a re-acceleration in the organic growth of its digital advertising business,” he sai. “Our $6 price target (prior $17) is based on an EV/2025E EBITDA (including capex) multiple of 6 times (prior 10 times) and, as a secondary valuation, 7 times (prior 11 times) our 2025 FCF forecast. Our enterprise value includes net debt of $22.7-million and applies a USD/CAD exchange rate of 1.42. This valuation is a discount to peers that trade at 7 times and 9 times FactSet expectations, respectively, due to challenged organic revenue growth, smaller scale and lower KPIs.”
Elsewhere, National Bank Financial’s Adam Shine moved his rating to “sector perform” from “outperform” previously, noting a quick “reversal of fortune” in less than a month.
“FORA reported its 4Q24 on March 12 and outlined bullish 2025 guidance on its March 13 call despite an initial flat MAU anticipated in 1Q,” said Mr. Shine. “[Tuesday] night, besides reflecting on a ‘very murky’ macro economic outlook of late, it highlighted unfolding challenges in recent weeks which impacted video advertising and traffic trends in 1Q which are likely to continue through the year while management works to rectify the problems. FORA now expects Adj. EBITDA in the range of $21-$24-million (consensus estimate $32-million) and FCF of $20-$22-million (FCF conversion of at least 85 per cent). Street estimates and targets need to be materially revised.”
“We updated our forecast and pushed our estimates toward the lower end of new outlook ranges. Given added risk beyond macro considerations, we added +10 bps to beta in our DCF. Our reduced target is based on average of 2025 estimated DCF and 2026 estimated NAV, with implied EV/EBITDA 7.4 times 2025 and 6.2 times 2026.”
TD Cowen’s Vince Valentini moved the stock to “hold” from “buy” with a $6 target, down from $15.
“Investors have shown little patience with this illiquid stock in prior periods when results were weak, and in this volatile macro environment, we believe it could take a long time for sentiment to recover,” he said.
“The warning from management relates largely to algorithm changes by third parties, which have suddenly reduced active users (MAUs) on the company’s community sites, and also reduced pricing power for programmatic video ads on the sites. If the weak 2025 guidance had simply been related to macro uncertainty impacting advertiser demand, then we believe investors could have shown more patience. However, with these being seemingly more structural issues that will likely take some time to resolve, we suspect that this stock will be under extreme pressure near-term. Less liquid names with cyclical advertising exposure were already facing an uphill battle in this bearish market environment, and now FORA has given investors justification to ride out the storm elsewhere. We are not lowering our rating below HOLD because we still have confidence that FORA has the balance sheet strength to recover longer term (including using excess debt capacity to augment growth via acquisitions, as they have done a bit in Q1/25), the valuation was already very low relative to RDDT, and lastly, we still believe the unique and authentic content on their forums will remain attractive to advertisers when global macro uncertainty eases. Our estimates have been materially lowered to match the new guidance.”
Meanwhile, RBC Dominion Securities’ Drew McReynolds cut his target to $10 from $17 with an “outperform” rating.
“Notwithstanding the emerging prospect of a softening advertising environment beginning in Q2/25 on tariff-induced economic uncertainty, this announcement and more importantly its impact comes as a surprise to us,” he said. “Pending additional granularity from management on the company-specific, cyclical and structural implications of these changes, we have adjusted our forecast consistent with updated 2025 adjusted EBITDA and FCF guidance. Reflecting our estimate revisions and a lowering of our target multiple to factor in the unexpected deterioration in earnings visibility, our price target decreases ... With the expectation of a material negative reaction in the stock to this update and our inclination not to overreact to what are ongoing Google algorithmic changes that are outside of the company’s control, we maintain our Outperform rating with the working assumption that these changes represent more of a ‘reset’ in response to the current environment with a belief that management given its track record is capable of instituting the required tactics to return to underlying growth.”
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With NowVertical Group Inc.’s (NOW-X) “growing scale fueling takeout optionality by larger IT peers,” Stifel analyst Suthan Sukumar sees “an attractive risk-reward” for the Toronto-based data and analytics software company, leading him to initiate coverage with a “buy” recommendation on Thursday.
“It’s full steam ahead on AI but enterprises are still grappling with foundational data challenges, creating a favourable demand backdrop for specialized data/analytics services firms like NOW,” he said. “Proprietary IP solutions and differentiated offshore delivery has allowed the company to execute better and faster (but not necessarily cheaper) on strategic data and analytics engagements vs. larger IT peers, allowing it to secure and grow with blue-chip clients like the Sky Group, MetLife and Disney, while expanding strategic relationships with partners like Google who is leveraging the company in key growth markets to bolster their market share in cloud and data/AI vs. hyperscaler peers. We see NOW well-positioned for wallet-share gains with existing clients and new client growth, supporting stronger double-digit organic growth with EBITDA/FCF margin expansion to 20 per cent or more.”
In a report released before the bell, Mr. Sukumar touted a “long, macro-resilient growth runway” for NowVertical as well as a “unified strategy to unlock greater growth/margin upside potential.”
“Our recent proprietary IT spending survey highlighted data/analytics and AI/genAI as the two top priorities for increased IT spending by companies for this year,” he said. “With a dedicated focus on data and analytics, we see NOW well-positioned to leverage its expertise for the groundswell in underlying data transformation to support acceleration of AI initiatives in the enterprise, allowing it to capture greater share of the high growth data/analytics market, which is expected to grow at a 29-per-cent CAGR [compound annual growth rate] to more than $300-billion by 2030 globally (higher at 38-per-cent CAGR in NOW’s core LatAm market), providing the company with a long runway for organic growth.
“A pivot from an industry consolidation model to an organic growth model in 2024 saw NOW re-focus core assets from prior acquisitions to deliver a unified solutions, services and go-to-market strategy, yielding a rebound in organic growth and EBITDA over the past four consecutive quarters. Notably, top-30 clients grew 20% y/y via expanded cross/up-sell of offerings and integrated global delivery (India/Argentina), with eight clients now generating over $1-million, up from three in F23. NOW sees opportunity to nearly double revenues (at higher margins) from top clients by expanding its lens to the top-50 this year by targeting additional strategic, high-value clients with similar expansion potential as the top-30 (average annual spend of $700k).”
He set a Street-high target of 75 cents per share. The current average is 55 cents.
“Attractive risk-reward. NOW trades 4.9 times calendar 2026 estimated EBITDA,” Mr. Sukumar said. “Our DCF-backed $0.75/share target implies 6.7 times C26E EBITDA, a modest discount to the broader small-to-mid cap IT services peer group at 7.7 times reflecting NOW’s smaller scale and higher leverage. Continued execution on organic growth and EBITDA upside coupled with further deleveraging should support multiple expansion. We see recent private equity takeouts of Canadian SMID-cap IT firms Quisitive and Converge at 8 times NTM [next 12-month] EBITDA as further support for valuation, with Softchoice’s 11 times EBITDA takeout highlighting the upside case for a strategic takeout, a scenario we increasingly see playing out given rising industry M&A focused on data/analytics/AI assets.”
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In other analyst actions:
* Touting valuation support, near-term catalysts and secular growth, BofA Securities’Craig Siegenthaler upgraded Brookfield Asset Management Ltd. (BAM-N, BAM-T) to “buy” from “neutral” with a US$65 target. The average is US$56.55.
“We remain positive on the multiple secular drivers supporting the Alts including GP consolidations, infrastructure, insurance, and private wealth. Brookfield Asset Management (BAM) has the #1 infrastructure business in the world and is building an insurance business that replicates the success of APO. In our view, the BAM stock is well positioned for these themes while offering a defensive FRE rich profit stream that is currently being undervalued by the market and offers several near-term catalysts: 1Q25 & 2Q25 EPS beats and multiple index additions,” he said.
* In a report titled Engineered for volatile times, Canaccord Genuity’s Yuri Lynk lowered his targets for AtkinsRéalis Group Inc. (ATRL-T) to $105 from $107 and WSP Global Inc. (WSP-T) to $300 from $305 with “buy” ratings for both. The average targets are $93.31 and $293.21, respectively.
“STN [TStantec Inc.] and WSP are down 6 per cent and 9 per cent, respectively, from their 2025 highs while their worst declines have averaged 22 per cent and 26 per cent over the last ten years,” he said.. “ATRL has been the underperformer amongst the three, down 19 per cent from its 2025 high. There were a number of headwinds for the non-residential construction industry in Q1/25. These include a 14-per-cent increase in the price of steel in the quarter, poor weather conditions, and, most importantly, increasing uncertainty regarding U.S. tariffs. We believe these issues could manifest themselves in the form of weaker new awards, something we’ll be tracking closely. We also want to point out that Q1/24 represents a very tough comparator from an organic growth and margin perspective, and we therefore expect slower organic growth but nevertheless see this translating into double-digit percentage adj. EPS growth in Q1/25
* CIBC’s Kevin Chiang cut his targets for Cargojet Inc. (CJT-T) target to $150 from $163 and TFI International Inc. (TFII-N, TFII-T) to US$115 from US$141 with “outperformer” ratings for both. The averages are $154.58 and US$123.96, respectively.
“Heading into the Q1/25 earnings season, we do not expect any major guidance revisions from the Canadian rails, the waste sector, CHR or CAE (note, CAE is reporting Q4/F25 results). We also expect MTL to hold its guidance, recognizing it is more dependent on M&A activity (it is incorporating $150MM in acquisitions this year in its outlook). We do foresee risk to AC’s guidance as we update our FX and fuel price outlooks and consider their impacts on near-term booking trends given the growing economic issues facing the North American economy. We expect AC to lower its EBITDA guidance for 2025 from $3.4B–$3.8B to $3.0B–$3.4B (we are forecasting $3.23B). Finally, while TFII did not provide official guidance for 2025, we see a risk that it provides more cautious commentary on its expectations for the remainder of the year, considering the mid-quarter updates provided by some of its peers,” he said.
“We like the following names heading into Q1/25 reporting season. 1) We like the waste sector, as we do not expect any major surprises and the resiliency in its business model renders it highly defensive. While there is likely to be some volume softness given the challenging weather conditions in February and potentially weaker industrial volumes given the uncertain business environment, we believe those issues are factored into estimates. We have an Outperformer rating on GFL, RSG and WCN. 2) Within the freight space, we expect CN and CPKC earnings to be non‑events (we are generally in line with consensus and expect both rails to maintain their outlooks), which we view as a positive given underlying freight trends remain challenged. CPKC is our preferred name. 3) Within our small/mid-cap names, we like AND and CHR, as both companies have significant earnings visibility.”
* Canaccord Genuity’s Aravinda Galappatthige reduced his Cineplex Inc. (CGX-T) target to $11 from $14 with a “buy” rating. The average is $13.08.
“The box office results for Q1/25 came in notably lower than expected totalling $101.9-million, compared to our original projection of $130.1-million, 65 per cent of pre-pandemic levels (2019),” he said. “This shortfall was primarily due to weaker performance in March, where box office sales were down 50 per cent year-over-year . On a positive note, Q2 could see better trends, led by Minecraft’s strong box office opening earlier this month. Combined with a robust upcoming slate — Thunderbolts, Mission: Impossible – The Final Reckoning, Lilo & Stitch, Karate Kid: Legends, Ballerina, How to Train Your Dragon, Elio, and F1 — we expect a robust performance in Q2. Factoring in the above, we have made downward revisions to our estimates.”
* JP Morgan’s Anthony Paolone lowered his target for Colliers International Group Inc. (CIGI-Q, CIGI-T) to US$142 from US$167 with a “neutral” rating. The average is US$166.
* After North West Co. Inc. (NWC-T) reported adjusted earnings per share for the fourth quarter of 2024 of 86 cents, rising from 71 cents a year ago and 11 cents above the consensus forecast, TD Cowen’s Michael Van Aelst increased his target for its shares to $63 from $59 with a “buy” rating, while BMO’s Stephen MacLeod increased his target to $60 from $58 with an “outperform” rating. The average is $60.07.
“Favourable mix and solid execution (including initial benefits from NWC’s Next 100 initiatives) pushed Q4 adj. EBITDA ex-SBC up 11 per cent year-over-year and 5 per cent above our estimate,” Mr. Van Aelst said. “Mid-/longer-term, substantial government spending in northern communities, along with large settlement payments should drive elevated earnings growth through the end of the decade.”