Inside the Market’s roundup of some of today’s key analyst actions
Desjardins Securities analyst Chris MacCulloch raised his forecast for Peyto Exploration & Development Corp. (PEY-T) following “constructive” fourth-quarter 2024 financial results, seeing its ambitious cost reduction and margin improvement initiatives helping to fund its “lofty” dividend.
“With integration of the Repsol Canada assets essentially complete, the company plans to remain disciplined with respect to its development program in response to fluctuating natural gas prices,” he said. “Meanwhile, PEY remains well-insulated from tariffs with synthetic exposure to US price hubs and materially all capital and supplies sourced domestically.”
In a research note released before the bell, Mr. MacCulloch said he was “pleased” to see the Calgary-base company accomplish its target of a 10-per-cent reduction in operating costs on the Repsol lands “after optimizing infrastructure and executing a targeted development program which harmonized its cost structure.”
“Unfortunately, there are less visible improvements on the horizon in 2025, with management specifically noting on the conference call that most of the ‘low-hanging fruit’ had now been picked. Fair enough,” he added. “That said, management identified several tailwinds that could deliver additional savings this year, including a normalization of methanol prices which have burdened operating costs as of late. Regardless, we feel inclined to reiterate PEY’s coveted status as the lowest-cost publicly traded producer in the WCSB following management’s relentless pursuit of margin improvements, which ultimately funds the company’s lofty dividend.
“On that note, we continue to view the current dividend as stretched, albeit sustainable at current strip prices, with the company sporting a capex-adjusted payout of 103 per cent and 84 per cent in 2025–26, respectively, despite support from a deep and profitable hedge book. However, the combination of softer natural gas prices, organic production growth and an elevated payout have constrained PEY’s ability to delever the balance sheet, with corporate net debt dropping by a mere $15-million over the past year. Ultimately, the company will need some commodity price support to accelerate balance sheet deleveraging.”
Increasing his cash flow projections through 2026, Mr. MacCulloch bumped his 12-month target for Peyto shares to $17 from $16.50, reiterating his “hold” rating. The average target on the Street is $18.75, according to LSEG data.
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Following a fourth-quarter earnings miss, Raymond James analyst Daryl Swetlishoff thinks Conifex Timber Inc.’s (CFF-T) near-term outlook is “clouded by tariff uncertainty.”
“Shares have been under heavy pressure with the stock down 52 per cent over the past year, vs. the lumber peer group down 11 per cent (TSX Index up 12 per cent) leaving the stock in deep value territory,” he said. “Current trading levels are well below our risk-adjusted NAV estimate — with the market assigning negative value to Conifex’s lumber platform — and remain dramatically below tangible book value.
“Despite market sentiment, we highlight that Conifex maintains several positive attributes, including: 1) a high degree of timber self-sufficiency, 2) improved lumber sales realizations following the transition to high-value green timber harvesting, and 3) the stability and cash flow diversification provided by its Bioenergy operations. We also highlight current after-tax duties on deposit translate to $41-million or 3.3 times CFF’s current market cap — and could potentially be monetized to shore up financial flexibility as required. That said, with all assets located in Canada, ‘Trump tariff’ related uncertainty presents a headwind, especially when combined with existing 14.4-per-cent softwood lumber duties (set to double in August 2025).”
Accordingly, while noting increase lumber pricing presents “a meaningful offset,” Mr. Swetlishoff lowered his rating for Conifex shares to “market perform” from ”outperform” previously “while we see how equilibrium pricing settles out.”
“With tariff-induced uncertainty lumber buyers and mills are currently in a stalemate, characterized by low volumes with producers fully implementing the 25-per-cent impact,” he noted. “With lumber included in the 1-month delay of tariffs, cash benchmark lumber pricing has started to crack with the midweek print with front month futures sitting at a US$24/mfbm discount. We note Conifex’s Mackenzie sawmill has restarted its 2nd shift on Jan 6th, generating steady residual supply to maintain operations at the CoGen.”
Mr. Swetlishoff, currently the lone analyst on the Street covering the Vancouver-based company, maintained an 85-cent target.
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After an “exceptional” quarter for Blackline Safety Corp. (BLN-T), Ventum Capital Markets analyst Amr Ezzat warns investors should expect “near-term noise, but the long game wins.”
“Born from a relentless commitment to innovation, Blackline has emerged as the undisputed industry leader in true connected safety solutions,” he said. “Since F2014, Blackline has reinvested 26 per cent of its sales into product development resulting in a differentiated product line and a three- to five-year technological lead over competitors. Yet, despite its clear market leadership, investors often pigeonhole this trailblazer as merely a hardware provider to the Canadian energy sector. This narrow view overlooks a much richer narrative.
“Over the years, Blackline has diversified both its revenue streams and its global reach, with 81 per cent of business now outside Canada and only 36 per cent tied to oil and gas — a far cry from the Company’s beginnings. At the core of Blackline’s strategy is its unique business model that fully integrates high-margin service revenues with each hardware sale and has led to a 31 per cent/33 per cent sales/ARR CAGR [compound annual growth rate] over the last five years. In fact, Blackline has cemented its position as one of the fastest-growing Canadian tech companies over the past several years. As Blackline continues to scale, this model is set to unlock substantial margin expansion, with gross margins expected to rise to 62 per cent by F2028 from 58.3 per cent (F2024), fuelling aggressive earnings growth. We foresee Blackline evolving from a breakeven EBITDA business to a 15-per-cent-plus EBITDA margin business by F2028, with further expansion expected in our longer-term projections.”
On Wednesday, shares of the Calgary-based company jumped 7.7 per cent after it posted “strong” first-quarter 2025 results that saw hardware sales surge 56 per cent year-over-year to $17.8-million, “significantly outpacing” Mr. Ezzat’s $13.7-million estimate (a 20-per-cent increase). Revenue rose to $37.7-million from $35.7-million during the same period a year ago, exceeding both the analyst’s $31.8-million estimate and the consensus expectation of $32.7-million. Adjusted EBITDA of $1.5-million also topped projections (losses of $1.3-million and $0.7-million, respectively), rising from a deficit of $0.7-million in fiscal 2024.
“Stronger hardware sales and improved product margins (40 per cent versus 29 per cent last year) drove an EBITDA beat, marking the third consecutive quarter of positive EBITDA, well ahead of both our and the Street’s negative EBITDA expectations in what is typically a seasonally weaker quarter,” said Mr. Ezzat. “Service margins also strengthened to 77 per cent, further reinforcing Blackline’s high-margin recurring revenue model.
“Blackline continues to execute on its U.S. manufacturing shift, moving final assembly to Houston while keeping PCB production in Canada. This transition is expected to take a few months to ramp up, with only a modest capex investment ($1-million over several quarters) and no expected long-term margin impact.”
Also emphasizing Blackline “deepened its footprint in the UK water sector” and appears to be tariff resilient through its manufacturing shift, the analyst raised his target for the company’s shares to $8.25 from $7.75, reiterating a “buy” recommendation.
“With strong Net Dollar Retention (NDR) rate of 128 per cent, Blackline continues to scale its high-margin, predictable service business while delivering strong retention and upsell execution,” he said.
“We expect the Company to grow its sales by 49 per cent by F2026 and post an EBITDA positive F2025; as such, we believe using multiples on short-term estimates significantly (and incorrectly) undervalues BLN shares as they give no recognition to the Company’s explosive growth profile.”
Elsewhere, Canaccord Genuity’s Doug Taylor increased his target to $8.50 from $8 with a “buy” rating.
“We believe Blackline’s strong competitive positioning and differentiated product offering within the connected safety device market should allow the company to continue to take market share in any tariff scenario – this view underpins our ongoing positive thesis on the name. With that said, management is making plans to dampen any impact from U.S. tariffs (stocking U.S. inventory and starting U.S. manufacturing) on its customers. Our $8.50 target price is increased as we roll forward our model on the company’s strong growth profile, noting our model does factor in a slightly lower near-term revenue profile while we assess ongoing tariff uncertainty,” said Mr. Taylor.
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While he lowered his full-year forecast to reflect the suspension of its U.S. fracking operations, Raymond James analyst Michael Barth continues to see “good value” in Step Energy Services Ltd. (STEP-T).
“STEP’s balance sheet is in great shape, and we still believe they have capacity to pursue shareholder returns via the NCIB this year (and in subsequent years),” he said.
After the bell on Tuesday, the Calgary-based company reported fourth-quarter earnings before interest, taxes, depreciation and amortization (EBITDA) of $4.1-million, exceeding both Mr. Barth’s $2-million estimate and the Street’s expectation of $1-million. He attributed the beat to stronger-than-expected contributions from its domestic fracking business, which he said “remains resilient and activity levels should persist.
“Both revenue and adjusted EBITDA came in 13/26 per cent above our estimates, respectively. STEP indicated that 1Q25 frac activity is expected to be robust across both frac and coil tubing, and 2Q25 appears similar to 1Q24, while the 2H25 is less certain. While weather conditions remain unpredictable, their impact on operations is expected to be modest. Pricing has improved in 1Q25 but remains below 1Q24, and the weak CAD vs. USD has also led to margin compression, particularly on proppant.”
“Given the difficult operating environment STEP has decided to suspend its U.S. frac operations, and will begin an orderly wind down process once 1Q25 work is complete. We have reduced our U.S. frac estimates accordingly. The remaining frac equipment could be brought into Canada (not adding additional active equipment), replacing the older Tier 2 equipment, or could be sold to a willing buyer (proceeds likely directed to reducing debt). On the coil tubing front, activity has shown improvement. Midway through 1Q25 STEP reactivated one idle unit (12 active) and could add another in 1H25 if demand continues. Notably, now that U.S. frac will be suspended, we don’t expect any customer attrition in the coil tubing business. The company expects activity to remain stable in 1H25.”
Maintaining his “outperform” rating, Mr. Barth trimmed his target to $5.50 from $5.75 to reflect the U.S. suspension. The average target is $5.18.
“STEP continues to trade below our estimate of replacement cost (just 0.8 times EV/Invested Capital),” he concluded. “Given what we see as sufficient cash generation to continue repaying debt, max out an NCIB, and entertain a dividend, we continue to see reasonable value here.”
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National Bank Financial analyst Dan Payne saw Birchcliff Energy Ltd.’s (BIR-T) release of a 2025 guidance revision and test results from its Elmworth well n the Lower Montney as “another positive update, reflecting the progression of the business, and the value resulting from its patient approach!”
“In association with its formal year-end filing that validated its previously reported preliminary year-end, the company provided a few complementary outcomes that reflect continued improvement of its fundamental value profile,” he said. “Strip pricing has improved since last update to support 30-per-cent expansion to its 2025 forecast cash flow profile (indicative of the strength of its NYMEX basis market exposure), indicative of its relative sensitivity to the commodity (and which should further compound as AECO basis structurally compresses in association with LNG Canada coming on-stream through H2/25).
“That, in association with outperformance of its organic capital efficiencies, which sees one well removed from its annual program (26 wells to come on-stream through the year; capex unchanged), serves to positively compound its free cash flow profile by a factor of 80 per cent. With that, we now see its 2025 maintenance capital program being supported within a 50-per-cent payout (from 65 per cent) to support a 20-per-cent FCF yield (from 11 per cent) and leverage of less than 0.5 times D/CF [debt to cash flow] (from less than 1.0 times), as a positive indication of ongoing value tailwinds within.”
In a note titled Tailwinds to Value Beginning to Howl, Mr. Payne also Birchliff “surprised with a strong test result” from one of its initial wells on its Elmworth land block “with the well having tested a robust 17 mmcf/d (plus 5 bbl/mmcf) at high-pressures over a three-day test period.”
“A significant milestone for the company to validate the high-impact prospectivity of the acreage, which remains ideally suited to support value expansion as the domestic gas market evolves (we have previously suggested around $0.50 per share in value for this asset, which should increasingly be ascribed in its valuation, as it trades at a discount to the peers),” he said.
The analyst kept an “outperform” rating and $8 target for its shares, exceeding the average of $7.27.
“BIR is poised for a 12-per-cent return profile (vs. peers 20 per cent) on leverage of 0.9 times (vs. peers 0.3 times), while trading at 3.8 times 2025 estimated EV/DACF (vs. peers 3.9 times),” said Mr. Payne.
Elsewhere, a pair of analysts upgraded Birchcliff shares:
* Canaccord Genuity’s Mike Mueller to “buy” from “hold” with a $7 target, up from $6.
“While the company has ample runaway across its core Pouce Coupe and Gordondale assets (we note 2P RLIs of 34 years based on annualized Q4/24 volumes), BIR holds 145 net sections of contiguous lands at Elmworth within the Montney/Doig fairway,” he said. “Notably, BIR completed a Middle Montney land retention well last month on the asset (drilled in Q3/24) with a 10.5-day flow test recording a raw natural gas rate of 17 mmcf/d (~2,918 boe/d) at 12 MPa casing pressure over the final three days of the test. Although the asset is still in the early innings of development with scoping of a potential 80 mmcf/d gas plant being advanced coinciding with its firm takeaway capacity in the region (late 2028), an encouraging test rate provides a new data point on a cohesive land block surrounded by increasing industry activity.
“Finally, with front-month HH prices up 30 per cent year-to-date, we highlight that BIR has proportionately the highest exposure to that benchmark across our coverage at 35 per cent of its 2025E natural gas production sold into that market via basis hedges. Every US$0.10/mmbtu move in HH prices impact the company’s cash flows by 1 per cent.”
* CIBC’s Christopher Thompson to “outperformer” from “neutral” with a $8 target, up from $7.
“We have taken a deeper look at recent operational performance alongside Birchcliff’s Q4/24 results, which had previously been released and were in line with expectations. We believe the operational rate of change in the company is intriguing. Valuation has become compelling with steady multiple compression over the past six months, and the macro outlook for natural gas has improved with recent storage drawdowns. We also believe that the recent move to right-size its dividend and reduce leverage puts the company on the front foot to execute its NCIB should valuation remain compressed, with the stock now trading at 2.7 times 2026 EV/DACF versus dry gas peers at 4.2 times. We believe Birchcliff offers a compelling return versus its peers, and therefore increase our price target to $8/sh from $7/sh prior and upgrade to Outperformer rated,” said Mr. Thompson.
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Following a recent tour of one of its flagship stores in Chicago with management, Stifel analyst Martin Landry thinks Aritzia Inc.’s (ATZ-T) recent share weakness offers investors “a great entry point.”
“The store conveys well the company’s values; offering a personalized shopping experience in a luxurious setting, selling high quality fashionable products,” he said. “We believe it will help raise Aritzia’s brand awareness across the U.S. Midwest. We noticed an increasing number of products sold under the Aritzia brand. This strategy aims to raise Aritzia’s brand awareness with U.S. shoppers, which may not be as familiar with the company’s portfolio of brands as Canadians are. In our view, Aritzia has a long growth runway ahead with significant white space in the United States and internationally, and as such it is one of the most compelling long-term growth stories in the Canadian consumer sector.”
Mr. Landry said his investment thesis on the Vancouver-based retailer, which includes a “buy” recommendation, centres on two factors:
* Increasing visibility on its fiscal 2027 financial targets.
Analyst: “In October 2022, at the company’s investor day, management established a four-year plan which called for revenues to reach $3.5 to $3.9 billion by FY27 and for EBITDA margin to stand at 19 per cent. Given the missteps which occurred in FY24, investors became septic on the company’s ability to hit the targets discussed at the investor day. However, with the recent sales performance and margin recovery, these targets now appear more realistic and attainable. As we get more visibility on these targets, earnings estimates and valuation should increase.”
* Opportunities for substantial growth in both the United States and internationally.
Analyst: “Aritzia is getting significant traction in the United States, generating over $1 billion in annual revenues. According to our recent survey, Aritzia’s aided brand awareness in the USA is only at 14 per cent, compared to 73 per cent for Lululemon, which generates more than $6 billion in sales in the USA. This suggests a long growth runway for Aritzia and that the U.S. expansion is in its early stages. As the company opens new stores, it should increase brand awareness and accelerate new customer growth. In addition, we believe that the next leg of growth for the company could be international expansion in Europe and Asia.”
The analyst reaffirmed his $73 target for Aritzia shares, which falls below the $75.70 average on the Street.
“The potential implementation of tariffs by the United States on Canadian imports could result in material increase in the selling prices of Aritzia’s products in the United Sates, which could reduce their appeal and translate into lower volumes,” he noted.
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In other analyst actions:
* To reflect RBC’s updated commodity price assumptions, analyst Sam Crittenden raised his Hudbay Minerals Inc. (HBM-T, “outperform”) target to $16 from $15 and reduced his Labrador Iron Ore Royalty Corp. (LIF-T, “sector perform”) target to $36 from $38. The averages on the Street are $14.82 and $33, respectively.
* Scotia’s Phil Hardie lowered his Propel Holdings Inc. (PRL-T) target to $44 from $45, below the $47.81 average on the Street, with a “sector outperform” rating, while Raymond James’ Stephen Boland dropped his target to $44 from $52 with an “outperform” recommendation.
“Propel closed out a record 2024 meeting or exceeding its financial targets,” Mr. Hardie said. “Q4 was solid with the majority of key performance metrics coming in line or better than expected, however, Core EPS fell a bit short of expectations. The company published its 2025 targets with a strong outlook for growth. Highlights included top-line expansion of between roughly 30 per cent and 45 per cent. Based on just above the mid-point of the revenue target range and ~200 bp of margin expansion, we are forecasting robust EPS growth of almost 50 per cent for 2025. We expect continued robust EPS growth of 32 per cent for 2026.
“Propel is a leader in AI-powered alternative lending and is likely to further leverage this strength through expansion of its “Lending-as-a-Service” initiative. We believe the successful expansion of this initiative could be transformative for the company given that the related fee-based revenue bears no credit risk and is highly scalable, effectively serving as a growth engine while de-risking the company.”
* Canaccord Genuity’s Aravina Galappatthige raised his Stack Capital Group Inc. (STCK-T) target to $14.75 from $13.75 with a “buy” rating, while Raymond James’ Stephen Boland increased his target to $13.50 from $12 with an “outperform” rating. The average is $14.08.
“The company reported Q4/24 with the NAV rising by 11.2 per cent to $12.29, well ahead of our estimate $11.71 due to an upwards revision to its Canva investment and unrealized f/x gains. The main driver was SpaceX, which we had already factored into our estimates. Moreover, the recently announced CoreWeave investment offers further upside in 2025. Although Stack now trades at 0.9 times NAV owing to the recent sell off in the market, we do note that the stock has shown notable resilience of late during market sell offs. Even in the most recent sell off, Stack has held up reasonably well. We believe this speaks to its defensive credentials, which can easily be under-estimated due to the fact that the company makes investments in technology privatecos, which prima facie can be viewed as a volatile investment prospect,” Mr. Galappatthige said.