Inside the Market’s roundup of some of today’s key analyst actions
While second-quarter results for Canada’s banks came in better than he expected, CIBC World Markets analyst Paul Holden cautioned domestic macroeconomic data points make it hard to get positive on the outlook for personal and commercial banking.
“The outlook for the remainder of F2025 is not great with most banks guiding to slow loan growth, flattish NIM [net interest margins] and still elevated impaired PCLs [provisions for credit losses],” he said. “There is not much to get excited about for the remainder of the year, but that doesn’t seem to matter as bank stocks have rallied significantly over the past two months and are now trading above historical averages. It is hard to build a compelling thesis for the group based on recent macro economic readings in Canada, the near-term outlook provided by the banks and valuations. Buying the banks today means stretching the time horizon and/or taking a more positive view on F2026. We are not there yet.
“Key points following FQ2 reporting are: 1) impaired PCLs should take longer to normalize due to macro uncertainty and the banks have provisioned more for that scenario; 2) loan growth will be muted in the near term with both consumers and businesses hitting the pause button on major investments; 3) markets-related businesses (trading and wealth) are providing a significant boost to earnings; 4) capital ratios are in a very good spot across the group and the majority of banks are buying back stock; and 5) valuation multiples imply that the market is looking past tariff-related impacts and pricing the stocks off normalized earnings.”
In a research report released Thursday, Mr. Holden emphasized the presence of “credit confusion” and predicted “provisioning for more, expecting the same.
“Impaired PCLs were down quarter-over-quarter while all banks provisioned for higher future losses based on updated forward looking indicators. Impaired PCL guidance across the banks was relatively the same – expect similar to slightly higher losses in H2/25 vs. FQ2. The competing forces of job losses vs. actual credit performance make it tough to make a call that is all that different from management guidance. We assume impaired PCLs are slightly higher over the next two quarters (2 basis points on average) and then improve in F2026.
“A muted growth outlook for the back half of F2025. It is hard to get excited about the near-term outlook for P&C banking given a pause in lending activity, the expectation for flattish NIM, and elevated loan losses. This makes us want to underweight banks with a higher proportion of earnings from P&C banking and overweight the banks that have a higher proportion of everything else.”
Mr. Holden thinks it is “easier to be positive on wealth management and trading given equity market levels and price volatility,” which led him to “tilt in favour of banks with more markets-driven business and supports our Outperformer rating on RY [Royal Bank of Canada].”
‘We also maintain our Outperformer rating on TD given modest EPS expectations and potential sources of EPS upside," he added.
Mr. Holden raised his targets for shares of four banks in his coverage universe. They are:
- Bank of Montreal (BMO-T, “neutral) to $156 from $150. The average on the Street is $154.50, according to LSEG data.
- National Bank of Canada (NA-T, “underperformer”) to $127 from $125. Average: $139.23.
- Royal Bank of Canada (RY-T, “outperformer”) to $183 from $182. Average: $182.35.
- Toronto-Dominion Bank (TD-T, “outperformer”) to $99 from $96. Average: $95.53.
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While its first-quarter results were “mixed” and baseline second-quarter expectations fell short of expectations, RBC Dominion Securities analyst Paul Treiber emphasized The Descartes Systems Group Inc.‘s (DSGX-Q, DSG-T) “M&A model is counter-cyclical and capital deployed may increase in this environment.”
“In light of macro uncertainty, Descartes implemented a 7-per-cent RIF (reduction-in-force). Management reiterated Descartes’ 10-15-per-cent per annum EBITDA growth target,” he said. “Macro uncertainty is creating a favourable M&A environment (lower valuations, more sellers, fewer buyers). Descartes has ample financial resources to deploy on acquisitions ($168-million net cash, est. $281-million FCF NTM [next 12 months]). We estimate every $200-million deployed on acquisitions is 8-per-cent accretive to EPS.”
Mr. Treiber said the Waterloo, Ont.-based company’s decision to reduce its global workforce and implement a restructuring plan in the second quarter, which is expected to include notable operating expenditure reductions, “provides margin visibility and operating flexibility amidst uncertainty.”
“The restructuring cost is expected to be $4-milliom over the next 6 months, with annual opex savings of $15-million vs. the Q1 run-rate,” he explained. “We note that this is in addition to the 2-per-cent reduction-in-force completed in Q4 ($4-million annualized opex savings). The restructuring is intended to provide Descartes with visibility to continued adj. EBITDA and free cash flow growth amidst macro uncertainty. As a result, Descartes reiterated its long-term target for 10-15-per-cent adj. EBITDA growth.
“Uncertain environment may create additional opportunities for M&A. Descartes deployed $112-million on the acquisition of 3GTMS in Q1. The acquisition brings Descartes’ TTM [trailing 12-month] capital deployed to $413-million, which is an all-time high in annual capital deployment for the company and nearly 3 times the prior TTM period. Given the favourable M&A environment, management believes the company is well positioned for potential opportunistic acquisitions. Descartes is well capitalized with $168-million net cash and a $350-million untapped credit facility, while we forecast the company will generate $281-million FCF over the next 12 months. We estimate every $200M-million deployed on acquisitions is 8 per cent accretive to EPS.”
After the bell on Wednesday, Descartes reported quarterly revenue of US$169-million, up 11 per cent year-over-year but below Mr. Treiber’s US$172-milllion estimate and the consensus forecast of US$170-million. GAAP earnings per share of 42 US cents fell short of projections (45 US cents and 44 US cents, respectively). Its second-quarter baseline of US$150.5-million in revenue and US$58-million in adjusted EBITDA was under Mr. Treiber’s projections (US$157-milllion and US$60-million).
“We estimate Q2 baseline implies organic growth slows to 0 per cent, which is below our model (6 per cent),” he said. “Based on management’s commentary, we believe that baseline likely incorporates some conservatism with respect to contribution from 3GTMS. Based on new disclosures, baseline appears to assume that recurring revenue attrition is above Descartes’ historic levels (i.e. 4-7 per cent), whereas Descartes’ prior baseline methodology appeared to assume that attrition is in line with historical trends.”
After reducing his fiscal 2026 and 2027 expectations to fall in line with the results, baseline guidance and management commentary, Mr. Treiber trimmed his target for Descartes shares to US$126 from US$130, maintaining an “outperform” rating. The average target on the Street is US$118.66.
“Descartes has a strong track record of compounding capital, even during periods of slow organic growth,” he said. “Descartes is trading at 30 times NTM [next 12-month] EV/EBITDA, which is slightly above its 5-year average (28 times).”
Elsewhere, Barclays’ Raimo Lenschow cut his target to US$108 from US$118 with an “equal-weight” rating.
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RBC Dominion Securities analyst Walter Spracklin thinks Canadian National Railway Co.’s (CNR-T) port in Prince Rupert, B.C. is “on the verge of meaningful growth” and tours “an interesting mix of existing opportunities and (near-term) future growth potential.”
In a research report reviewing a tour earlier this week, he emphasized the current facilities now sit at only 50-per-cent utilization, and he sees “open line of sight for multi-year 10-per-cent volume growth in the region, which is 2 times to 3 times CN’s (and any other railroads) network volume growth.”
“For the 35 years since the first export facility investment in the region in 1972, the Port of Prince Rupert saw little development; with mainly only a Grain and Coal terminal in operation,” he said. “2007 then saw the beginning of a buildout that would see 13 new projects come into play from 2007 to 2025, with another 5 under development. Key is that Rupert is now big enough to move the dial for CN (10 per cent of revenue) and is forecasted by management to grow at double digit volume growth for many years to come. This report double clicks the key areas of growth, namely: Bulk, Intermodal and LNG.
“Container growth rebounding. Having grown to 1.2 million TEUs [twenty-foot equivalent units] in 2019, labour uncertainty led to a drop in volumes to 700K TEUs in 2023/24. With capacity now at 1.6 million TEUs, growth is coming back online. New Gemini service has already brought that to a new run rate of 800K to 900K in 2025 (May was the strongest month in 5 years), with mgmt forecasting 1M TEUs by 2027. Key is that we believe this could scale much higher than this guide if we see Premier Alliance and/or MSC come back to the port - which we see as likely.”
Mr. Spracklin kept an “outperform” rating and $163 target for CN shares. The average is currently $165.20.
“Bulk products and NGLs are creating a steady level of core volumes,” he concluded. “Layered on top of that is Intermodal, which we believe can size significantly. Combined we see these projects as generating multiple years of 10-per-cent-plus volume growth out of Rupert, which we believe will drive above average overall volume growth for CN over an extended period. Moreover, we view this growth as high quality, deserving of a higher multiple. Accordingly, we continue to favour CN from both a near term tactical (value) opportunity and longer term re-rate story.”
Elsewhere, TD Cowen’s Cherilyn Radbourne reiterate a “buy” rating and $164 target for CN shares following the tour.
“CN made no changes to its 2025/multi-year guidance. Logistics projects underway should only reinforce Prince Rupert’s existing competitive advantages, and we see no reason why international intermodal volumes should not eventually return to/exceed prior peaks. We also gained a greater appreciation for Prince Rupert’s role as a key gateway for energy exports, particularly increasing NGL volumes,” she said.
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National Bank Financial analyst Vishal Shreedhar thinks Roark Capital’s divestiture of its remaining stake in Pet Valu Holdings Ltd. (PET-T) removes an equity overhang from the retailer’s shares, which he views as “constructive over the medium term.”
On Tuesday, the Markham, Ont.-based company announced a $576-million sale that sees Roark Capital and its affiliates sell almost 20 million shares to RBC Capital Markets and CIBC Capital Markets at $28.85 each, which was a 5.5-per-cent discount to the closing price that day.
“We note that Roark Capital has reduced its stake in Pet Valu at continually lower share prices in the past: (i) $37.40 (November 2022); (ii) $32.05 (June 2023); (iii) $29.65 (May 2024); and (iv) $28.85 (May 2025),” he said. “This deal was unexpected given that Roark recently sold 7.3 million shares (5.2 million share in bought deal, 15-per-cent over-allotment, and 2.1 million to PET; 11-per-cent stake in total) at the same price of $28.85/share, announced on May 12, 2025.”
Reiterating his thesis for Pet Valu, Mr. Shreedhar kept an “outperform” rating and $33 target. The average on the Street is $34.39.
“We hold a positive view on Pet Valu, reflecting its strong business positioning, attractive industry characteristics and high returns on capital,” he said. “We anticipate solid growth in revenue, EBITDA and FCF. We believe that PET’s shares can continue to gain traction as it demonstrates consistent execution against its promise of steady sales and profit growth.”
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Desjardins Securities analyst Allison Carson came away from a tour of Torex Gold Resources Inc.‘s (TXG-T) Morelos complex in Guerrero, Mexico “impressed by the operation, the team at site and the exploration upside potential remaining at the property,” which he now expects to drive the mine life beyond the current 2035 target.
In a note released Thursday, she said she remains confident in the Toronto-based company’s team as the Media Luna underground mine ramps up ahead of schedule and views completion of construction and returning to FCF positive as “key upcoming milestones,” both of which she now expects by mid-year.
“Stope development for 2025 is complete and many stopes planned for 2026 and 2027 have been developed. A limited amount of construction at Media Luna remains, with completion expected in July,” he said. “Once construction is complete, mining rates are expected to ramp up. TXG expects to achieve mining rates of 7,500 tons per day by mid-2026, with current mining rates at 5,000tpd. Commissioning of the paste plant remains on schedule to be completed in 2Q25, which will further support a ramp-up in mining.
“Cost optimization a key focus with AISC expected to peak in 2Q25. As previously outlined by the company, elevated initial costs associated with Media Luna will be recognized in 2Q25 due to the timing of the initial sale of concentrate. We expect 2Q25 AISC to exceed the upper limit of 2025 guidance (US$1,400–1,600/oz) and decrease in 2H25 as (1) production ramps up; and (2) the company achieves economies of scale. TXG continues to look at longer term cost optimizations, including finding closer ports to ship 50 per cent of concentrate to reduce transportation costs."
Ms. Carson emphasized exploration is now becoming a key focus during the ramp-up, seeing it as “central to developing Morelos into a multi-decade mining district.”
“Recent exploration work suggests the potential for a porphyry system at Morelos and TXG believes the property could host up to 20moz AuEq. Torex has a renewed commitment toward exploration with a 2025 budget of US$45-million,” she said. “The company intends to keep its exploration budget around this level to extend the mine life and find new deposits on the property.”
Ms. Carson maintained a “buy” rating and $60 target for Torex shares. The average is $54.46.
Elsewhere, National Bank’s Don DeMarco kept a “outperform” rating and $70 target.
“Is Morelos flirting with world-class status as we saw at FDN a few years ago?. We think so and completing Media Luna ramp-up to 7,500 tpd by mid-2026 while delivering on resource accretion may achieve this,” said Mr. DeMarco. ”TXG has already demonstrated strength in key areas of importance to investors: management, operations and now development, and all of this plus what we saw on the tour lends confidence with additional exploration success looming.
“On the doorstep of world-class status. Just as LUG delivered FCF, de-levered, backfilled production and added near-mine ounces – all of this is within sight for TXG over the coming quarters. By some a world-class mine is defined as more than 500/oz year for more than 10 years, AISC in the lower half of the industry cost curve, in premium geological districts with the potential for organic reserve growth."
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ATB Capital Markets analyst Amir Arif thinks InPlay Oil Corp. (IPO-T) has “more running room for improved well performance than the market realizes and what is reflected in consensus.”
In a research note released before the bell, Mr. Arif “slightly” increased his 2025 production outlook above the higher end of the Calgary-based company’s guidance, while he “meaningfully” lowered his 2026 capex estimates.
“IPO announced the $301-million acquisition of Obsidian’s Pembina Cardium assets on February 19, 2025, and closed the acquisition on April 7, 2025,” he explained. “The acquisition more than doubled IPO’s production and increases InPlay’s position within the Pembina Cardium. We sat down with the InPlay management team recently with a focus on the geology, variations across the play, and remaining 2025 plans. While the Cardium play overall is a mature asset and has variability given its conventional nature, we believe there are areas within the acquired assets that have low recovery factors from nearby verticals, low watercuts given location from injection wells, and high pressure that can provide some very solid drilling opportunities relative to the average typecurve for the play.
“In the remainder of 2025, we expect IPO to drill a threewell pad in August and an additional two wells later in the year. Based on its 2025 plans, the Company lowered its 2025 capex guidance while keeping production guidance flat with Q1/25 results. We believe that a similar set up could take place in 2026.”
He noted InPlay has become the largest producer in the Pembina Cardium, and sees “room for additional drilling opportunities that could continue to outperform guidance expectations.
“Post-acquisition, IPO is now the largest producer in the Pembina Cardium with the Pembina Cardium pool accounting for over 80 per cent of corporate volumes,” he added. “The Pembina Cardium field started producing back in the mid-1950s with vertical wells. The next step change was waterflood in the 1980s, a shift to horizontals in mid-2000s, and a meaningful ramp in field production starting in 2010 along with a pickup in horizontal drilling.”
Mr. Arif maintained an “outperform” rating and $13 target for its shares. The average is $13.50.
“At strip, IPO trades at 3.4 times 2025 and 3.1 times 2026 EV/DACF [enterprise value to debt-adjusted cash flow] with leverage (year-end net debt/CF) improving from 1.7 times in H2/25 to 1.4 times at year-end 2026,” he said.
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In other analyst actions:
* RBC’s Paul Treiber raised his target for Regina-based Information Services Corp. (ISC-T), which provides registry and information management services for public data and records, to $30 from $28 with a “sector perform” rating. The average is $31.33.
“Following a period of restriction and the conclusion of Plantro’s tender offer, we are updating our financial estimates and reiterating our Sector Perform recommendation. Regarding Q1, ISC reported Q1 revenue in line with consensus, with adj. EBITDA above consensus. The company reiterated FY25 guidance, though did not discuss its FY28 goals. ISC’s recently announced NCIB suggests a more flexible capital allocation strategy,” he said.
“We see ISC as a largely defensive stock, given the stock’s discounted valuation, FCF, and the regulated nature of the company’s business. ISC is trading at 8.7 times NTM [next 12-month] EV/EBITDA, below small cap data & IT services peers (9.1 times), though above its 5-year average (7.4 times average, 5-10 times range). Our Sector Perform thesis reflects our view that ISC is likely to compound capital at a slower rate than other stocks in our coverage.”
* KBW’s Tim Switzer cut his Versabank (VBNK-T) target to $19 from $21 with an “outperform” rating. The average is $18.40.