Inside the Market’s roundup of some of today’s key analyst actions
While its organic growth in the fourth quarter of 2024 fell below expectations, RBC Dominion Securities analyst Paul Treiber expects Descartes Systems Group Inc. (DSGX-Q, DSG-T) to “chug along regardless.”
“Despite the tailwind from increased demand for Descartes’ Global Trade Intelligence subscriptions, Q4 revenue and Q1 baseline were lighter than expected,” he said. “Although we’re slightly reducing our financial estimates, we believe tariff uncertainty will be a long-term driver of increased uptake of supply chain management software. Moreover, the M&A environment remains favourable and we see additional acquisitions as potential catalysts for the stock.”
After the bell on Wednesday, the Waterloo, Ont.-based software company reported quarterly revenue of US$167.5-million, up 13 per cent year-over-year but below both Mr. Treiber’s projection of US$173-million and the Street’s forecast of US$170-million. However, adjusted EBITDA grew 14 per cent to US$75-million matching expectations.
“Services organic growth sequentially slows,” the analyst said. “Excluding non-core PS/ license revenue, services organic growth was 6 per cent, slightly below the 7 per cent in our model and down from 7 per cent last quarter. Even so, Q4 services organic growth remained above Descartes’ 10-year historical average (5.5 per cent). Double-stacked services organic growth was 15.5 per cent, similar to last quarter and up from 14 per cent 1H. Management called out strong demand for Global Trade Intelligence and MacroPoint. Our FY26 organic growth estimate moves from 7 per cent to 6 per cent.
“Baseline implies Q1 below consensus. Q1 baseline for $145-million revenue and $55.5-million adj. EBITDA missed our expectations ($149-million revenue, $58-million adj. EBITDA). The TTM [trailing 12-month] delta between baseline and actuals implies Q1 actuals of $171MM revenue and $75MM adj. EBITDA, below consensus ($172-million, $76-million). Management suggested Q1 baseline is conservative. Our FY26 estimates move to $720-million revenue and $328-million adj. EBITDA, from $744-million and $338-million previously.”
Mr. Treiber also thinks tariff uncertainty on both sides of the border could prove to be a long-term tailwind for Descartes.
“Supply chain management software helps improve the efficiency of supply chains and better manage uncertainties such as tariffs,” he explained. As a result, we believe that Descartes is likely to sustain organic growth above its historical average. Moreover, the M&A environment is favourable (lower valuation multiples, more sellers, fewer buyers). We estimate every $200-million deployed on acquisitions is 8-per-cent accretive to EPS.”
Emphasizing it is “compounding capital through acquisitions and organic growth,” Mr. Treiber trimmed his target for Descartes shares to US$130 from US$133, keeping an “outperform” rating. The average target on the Street is US$125.71, according to LSEG data.
“Descartes has a strong track record of compounding capital through acquisitions and organic growth. Descartes is conservatively managed, which improves investor visibility to consistent FCF/share growth,” he said. “We believe Descartes’ valuation is attractive, with the stock trading at 29 times FTM [forward 12-month] EV/EBITDA, which is effectively at the mid-point of its 5-year range (28 times average, 20-36 times range). Our $130.00 price target reflects our revised estimates and remains based on 30 times CY26 estimate EV/EBITDA (unchanged).”
Elsewhere, other analysts making target adjustments include:
* CIBC’s Stephanie Price to US$127 from US$128 with an “outperformer” rating.
“Descartes reported FQ4 services revenue that was in line with consensus, and margins that were 100 basis points above the Street. While headline numbers were solid, constant currency services organic growth of 6 per cent was down sequentially from 7 per cent amid customer uncertainty. With $236-million in net cash, Descartes has room to continue to execute on M&A,” she said.
* Stephens’ John Campbell to US$137 from US$145 with an “overweight” rating.
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ATB Capital Markets analyst Martin Toner thinks Thinkific Labs Inc.’s (THNC-T) current share price reflects its “lack of liquidity, a deterioration in growth and a general lack of demand for less profitable growth assets.”
Accordingly, seeing its “model evolution taking time” as its management shifts its strategic focus, he downgraded the Vancouver software company, which provides a digital platform for entrepreneurs and businesses to create and run online courses, to “sector perform” from “outperform” previously.
“We believe there is a countercyclical element to the business, since during periods where the employment outlook is poor, people will seek out self-employment and use Thinkific’s platform, which we incorporate into our discount rate,” he said. “The market for Creator platforms is crowded but nascent. There are a number of credible competitors as well as capital entering the market. For these two reasons, Thinkific has one of the highest weighted average costs of capital (WACC) in our coverage universe.”
The rating changes comes after Wednesday’s release of “in-line and mixed” fourth-quarter 2024 financial results, which saw it meet the low end of its $17.6-million-$17.9-million revenue guidance but guided current quarter revenue growth below the Street’s expectation, “while showing signs of stagnating growth.”
“We believe a component of Thinkific’s customer base is struggling, and Thinkific is repositioning its offering and marketing efforts to target larger, more successful creators and commercial customers,” said Mr. Toner.
“Given five consecutive quarters of slowing GMV [gross merchandise volume] growth, which was down 0.3 per cent year-over-year in Q4, management stated that it was putting too much effort into attracting customers that are not an ideal fit for THNC’s platform. Moving forward, the Company will be narrowing its focus to target higher GMV customers. Specifically, management expects to begin acquiring higher GMV (more sophisticated) customers, which is expected to help re-accelerate GMV growth and drive higher Commerce and PLUS growth as well. This, however, ‘will take time to materialize’, as management is looking at ways to help customers get set up faster as well. Management is also looking to better monetize and narrow R&D spend, while also integrating new products features into its platform and citing “significant opportunities” to leverage AI to attract THNC’s new target customer. The longer-term goal is to attract new customers into PLUS (while also getting upgrades from the existing base), alongside gradually moving the higher GMV customers onto the Commerce platform.”
After reducing 2025 and 2026 revenue and adjusted EBITDA estimates to reflect the guidance miss and “the lack of visibility into a re-acceleration of GMV growth on the back of management’s new customer targeting strategy,” Mr. Toner dropped his target for Thinkific shares to $3.75 from $4.50. The average target is $4.87.
Elsewhere, CIBC’s Todd Coupland downgraded his recommendation to “neutral” from “outperformer” with a $3.50 target, down from $5.
“Thinkific’s Q4 came in at the low end of its guidance and its Q1 revenue guide is 5 per cent below FactSet,” said Mr. Coupland. “Beyond this report, the company has decided to pivot its strategy. Thinkific plans to focus on higher-value customers - both Plus (for enterprise) and Self-Serve (for SMBs) - that are more likely to be successful on its online learning platform. Our view is that the revised plan will take time to implement, including its required product enhancements and go-to-market motion necessary to generate incremental growth and profits. As such, we have lowered our rating.
“While we believe Thinkific is an excellent company, in our view, it is too early to pay for this pivot in strategy. We would revisit our thesis with improved annual recurring revenue (ARR) growth that supports a higher-quality revenue growth rate.”
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After a “record-setting” fourth-quarter of 2024, “reflecting continued momentum in revenue growth and EBITDA margin expansion,” and a better-than-anticipated outlook for the current quarter, Ventum Capital Markets analyst Devin Schilling sees shares of Kits Eyecare Ltd. (KITS-T) as “undervalued and at an excellent entry point given the long-term tailwinds provided by the increasing adoption of digital eyecare solutions.
“We view KITS as being at the forefront of transforming the eyecare industry through innovation and personalized customer experiences,” he added. “With a robust technological infrastructure and a scalable business model, we see KITS poised to capture market share and deliver long-term value to investors seeking exposure to the growing digital eyecare sector.”
Shares of the Vancouver-based company surged 7.8 per cent on Wednesday after it reported quarterly revenue of $44.8-million, up 42 per cent year-over-year and in line with pre-released preliminary results, while adjusted EBITDA grew 238 per cent to $2.9-million topping the $2.7-million estimate of both Mr. Schilling and the Street.
“The strong Q4 performance was driven by multiple consecutive record-breaking sales weeks, high customer engagement, and increased repeat purchases,” he said. “FCF generation during the quarter and year was $2.7-million and $9.9-million, respectively.”
“KITS achieved a gross margin of 36.3 per cent in Q4/24 (35.0 per cent last year) as the Company progresses towards the goal of establishing long-term gross margins of 40 per cent. KITS continues to see solid operating leverage with operating expenses as a percentage of revenue improving by 360 basis points from last year.”
After raising his 2025 expectations and introducing his 2026 estimates, Mr. Schilling increased his target for Kits shares to $16 from $15, keeping a “buy” rating. The average is $15.50.
“We are becoming increasingly confident that KITS will be able to avoid a major impact [from tariffs] given the Company’s large exposure to contact lenses (86 per cent of total revenue), which is easier to shift distribution to the United States if need be,” he added. “Furthermore, we highlight the possibility that KITS could open up a micro optical lab in the United States for the glasses segment (14 per cent of total revenue with the majority of these sales occurring in Canada) without substantial capex given the Company’s ability to relocate a small portion of equipment from Canada. Even after accounting for a potential 25-per-cent tariff, KITS-branded glasses remain 75 per cent more affordable than the average prescription eyewear, emphasizing a strong value proposition.
Elsewhere, Stifel’s Martin Landry raised his target to $18 from $15 with a “buy” rating.
“Management introduced a Q1/25 guidance calling for revenue growth of 35 per cent year-over-year at the mid-point, (vs our expectation for a 26-per-cent year-over-year growth), suggesting continued momentum,” said Mr. Landry. “KITS’s cash balance is building and debt levels are declining rapidly providing flexibility to management. Share buybacks could continue into 2025. Shares reacted positively to the results, rising 8 per cent on the day. Valuation remains attractive with the shares trading 1.5 times EV/2025 revenues, an appealing level given the company’s growth rates increasing profitability and healthy balance sheet.”
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“As a conventional explorer focused on Colombia with an enviable track record in years past,” RBC Dominion Securities’ Greg Pardy thinks Parex Resources Inc. (PXT-T) is “regaining its operational momentum following disappointing results in 2024.”
“In our minds, job one for Parex in 2025 remains to convert a differentiated conventional exploration story into a compelling investment case,” he said.
Before the bell on Wednesday, the Calgary-based company reported fourth-quarter results that the analyst saw as “solid,” including “in-line (pre-released) production of 45,300 boe/d [barrels of oil equivalent per day], 6 per cent lower capital investment and better bottom line results, in part driven by a $6-million current tax recovery.”
“Our 2025 production outlook of 45,200 boe/d is towards the mid-point of the company’s reaffirmed guidance of 43,000-47,000 boe/d amid a $300 million ($285-$315 million range) capital program,” said Mr. Pardy. “Through the first two months of 2025, the company’s production averaged about 44,500 boe/d (just below our 45,800 boe/d first-quarter estimate).
“In 2024, Parex replaced 98 per cent of its production of 18.3 mmboe with proven reserves at an all-in FD&A cost of $24.75/boe. About 57 per cent (10.2 mmboe) of these reserve additions were related to acquisitions. The company highlighted a number of positive reserve additions at LLA-34, Cabrestero, LLA-32 and Putumayo in the year which helped to offset the impact of negative revisions at Arauca, as well as a non-core block in the Magdalena Basin. Parex’s proven RLI stands at 6.8 years (up from 5.4 years in 2023).”
Maintaining a “sector perform” recommendation on Parex shares, Mr. Pardy raised his one-year price target by $1 to $16. The average is $19.34.
“We believe that Parex should trade at a discounted relative valuation given its strong balance sheet and commitment to shareholder returns, offset by mixed operating performance over the past year,” he said.
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TD Cowen analyst Derek Lessard thinks GDI Integrated Facility Services Inc. (GDI-T) is “worth a look,” calling it a “tariff resistant small cap.”
“GDI’s shares are down 14 per cent year-to-date (including 3 per cent Wednesday) and trading near all-time trough valuations, which is unwarranted in our view,” he said. “We continue to like the stock given GDI’s top-line opportunities (market share and new verticals), improving profitability (margin guardrails and mix), and meaningful FCF growth (margin and working-capital management).”
While investors weren’t impressed by the fourth-quarter results from Mississauga-based provider of facility services and solutions on Wednesday, Mr. Lessard emphasized its Business Services segment continues to grow in a “soft environment” alongside “another strong quarter” for its Technical Services business. He also noted GDI is likely to see a limited direct impact from U.S. tariffs.
“Supplies represent only a small percentage of BS’s cost structure,” he said. “In TS, most equipment is manufactured in Canada and the U.S. Some raw materials are sourced from China and Mexico, although management expects any cost increases to be passed on quickly given the short-term nature of break-fix contracts. For projects in the pipeline, GDI has already worked with suppliers and clients to lock down prices. Overall, we don’t see material cost impact from the tariffs in the near-term.
“We fine-tuned our model, raising 2025/2026 revenue and EBITDA by 3 per cent/1.5 per cent primarily reflecting the Q4 beat and a stronger USD. Our EPS estimates increased by 11 per cent/3 per cent due to higher EBITDA and reduced interest expense (on lower debt balance).”
Mr. Lessard kept a “buy” rating and $50 target for GDI shares. The current average is $45.63.
“GDI has a lot of positive qualities, including: 1) a growing and diversified customer base; 2) national reach and growing scale in North America; 3) relatively inelastic demand; and 4) a proven M&A strategy,” he said. “We see valuation expanding and pushing the stock price closer to our $50.00 target, given the solid top-line strength (winning market share through scale and service quality), improving profitability (from margin guardrails), and growing FCF (from higher margins and stronger working-capital management).”
Elsewhere, Desjardins Securities’ Frederic Tremblay trimmed his target to $48 from $50 with a “buy” rating.
“We were pleased with several 4Q24 elements, including Technical Services’ performance, new wins in Business Services and cash flow–driven deleveraging,” said Mr. Tremblay. “These areas of progress were partially masked by a steeper-than-expected organic decline in Business Services USA, but 1Q25 is expected to be the last quarter when this segment’s transient and timing-related growth headwinds are visible. We see a disconnect between GDI’s depressed valuation and the encouraging outlook, especially post-1Q.”
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In other analyst actions:
* Canaccord Genuity’s Mark Rothschild reduced his Automotive Properties REIT (APR.UN-T) target to $13 from $13.50 with a “buy” rating. The average is $13.03.
* Desjardins Securities’ Gary Ho bumped his CareRx Corp. (CRRX-T) target to $4 from $3.75 with a “buy” rating. The average is $3.44.
“We are more positive in relation to the 4Q miss following management’s clarification on higher ‘other’ operating expenses, which are mostly one-time in nature (related to the North Burnaby ramp). Excluding this, 4Q might have been a beat vs our estimates and consensus. Management appears confident in the bed growth pipeline for 2025, including 3,000 beds for 1H, and a 10-per-cent EBITDA margin target by mid-year. We increased our estimates slightly and like management’s continued active buybacks,” said Mr. Ho.
* Raymond James’ Steven Li cut his Evertz Technologies Ltd. (ET-T) target to $14, below the $15.50 average, from $16 with an “outperform” rating.
“A solid beat on revenues, but tariffs are expected to weigh on gross margins in the near-term. Our forecasts and target move lower as a result,” he said.
* Mr. Li raised his Tecsys Inc. (TCS-T) target to $50 from $45 with an “outperform” rating. The average is $47.50.
“Organic growth exc. Hardware was only about 7 per cent, slower than last quarter 13 per cent but under the hood, KPIs were solid (SaaS bookings, PS bookings and IDN wins). FY revenue growth guide upped to up 1-3 per cent (was flat) with better hardware and visibility (the strong PS bookings this quarter). A-EBITDA guidance now expected at the low end of range. Target up as we roll-forward,” he said.
* Scotia’s Phil Hardie bumped his First National Financial Corp. (FN-T) target to $45 from $44 with a “sector perform” rating. The average is $43.80.
“We think First National’s quarterly results provided another example of the resilience of its business model, with the strength of the fourth-quarter originations offsetting weakness through most of the year, with 2024 volumes coming in slightly ahead of 2023,” he said. “Core EPS came in generally in line with expectations.
“Broad-based tariff-related risks and their potential impact on labour markets cast a high level of uncertainty on the outlook for First National and the broader mortgage finance market. With minimal mortgage credit exposure, a contraction in mortgage volumes is the biggest tariff-related risk faced by First National. In the face of protracted slowdown, we expect the company to right-size to cut costs. Assuming recently announced tariffs are very short-lived, we expect First National to sustain operational momentum in the near term, with single-family volumes rising over 2024 as lower interest rates help fuel a solid spring housing market. ... FN offers a stable and healthy dividend yield, but our target price implies a below-average one-year return relative to the average of our coverage, with some risks to our outlook.”
* Desjardins Securities’ Frederic Tremblay trimmed his KP Tissue Inc. (KPT-T) target to $8.50, below the $9 average, from $10 with a “hold” rating.
“4Q24 results were broadly in line with expectations as both revenue and adjusted EBITDA grew. That said, management’s decision not to provide 1Q25 guidance and additional time required to evaluate a potential investment in new capacity underscore the significant increase in uncertainty caused by the U.S./Canada tariff situation. With this in mind, we remain on the sidelines with a Hold recommendation,” he said.
* TD Cowen’s Brian Morrison cut his target for Linamar Corp. (LNR-T) to $60 from $66 with a “hold” rating. The average is $67.80.
“Tariff uncertainty and market-share risk associated with AWP peers domiciled in the U.S. remain roadblocks withholding us from becoming constructive on Linamar, despite its attractive valuation based on company guidance and its track record of strong FCF. We do not see these risks subsiding near term, and with low relative trading liquidity, we believe a punitive target multiple is appropriate,” said Mr. Morrison.
* Goldman Sachs’ Matt Greene initiated coverage of Lundin Mining Corp. (LUN-T) with a “buy” rating and $16.60 target, exceeding the $15.85 average.
* Scotia’s Orest Wowkodaw cut his NexGen Energy Ltd. (NXE-T) target to $12 from $14.50 with a “sector outperform” recommendation, while TD Cowen’s Craig Hutchison lowered his target to $12 from $13 with a “buy” rating. The average is $13.98.
“We have reset our development, ramp-up, and financing assumptions for NXE’s flagship Arrow U3O8 project in Saskatchewan based on our expectation of an extended permitting/licensing cycle (we now anticipate construction to begin in mid-2026 with start-up in 2031, both one-year later than previously expected),” said Mr. Wowkodaw. “Given our lower estimates, we view the update as negative for NXE shares.
“Despite our tempered expectations, we continue to rate NXE shares SO based on the company’s world-class Arrow deposit, ongoing exploration upside (particularly at PCE), takeover optionality, and attractive fundamentals.”
* Ahead of its March 13 earnings release, ATB Capital Markets’ Chris Murray increased his NFI Group Inc. (NFI-T) target to $24 from $22, above the $19.80 average, with an “outperform” rating.
“We expect NFI to report revenue and Adjusted EBITDA of $923.8-million and $71.1-million, respectively, within management’s guidance range,” said Mr. Murray. “We forecast 1,402 deliveries with profitability supported by another stronger quarter from Aftermarket. Key items in the quarter include updates on the ongoing seat supply issue expected to pace 2025 deliveries, bidding activity, tariff-related impacts and 2025 guidance, which management has recently indicated it was holding but has been met with significant market skepticism. We would see maintaining the 2025 guide as a positive given sentiment. Given elevated working capital needs, we expect liquidity levels to be topical, particularly given recent covenant relief and the scheduled step in the interest coverage ratio at Q1/25. NFI has announced several contract wins since reporting Q3/24 results, reinforcing healthy demand conditions and its competitive position. While the threat of tariffs and supply chain challenges have posed headwinds in early 2025, we continue to see a path to a recovery in 2025 and 2026, given the transitory nature of the seat issue and better pricing embedded in what is expected to be a record $14.0-billion-plus backlog. With shares trading at 5.6 times 2025 estimated EBITDA, we see attractive value in NFI and would remain buyers.”
* TD Cowen’s Aaron MacNeil increased his South Bow Corp. (SOBO-T) target by $1 to $35 with a “hold” rating. The average is $33.16.
“Q4/24 EBITDA beat us/consensus by 16 per cent/12 per cent, and 2025 guide was 3 per cent/4 per cent below,” he said. “We believe South Bow’s exposure to KXL rights and its Big Sky open season drove the recent outperformance (year-to-date up 15.7 per cent vs. Canadian peer average down 4.3 per cent) as investors get greater comfort on its long-term growth potential. South Bow is trading at a premium to its NAm oil-weighted peers.”
* RBC’s Greg Pardy lowered his Strathcona Resources Ltd. (SCR-T) target by $1 to $34 with a “sector perform” rating, while TD Cowen’s Menno Hulshof cut his target to $29 from $32 with a “hold” rating. The average is $34.63.
“Q4 results were mixed. Weaker-than-expected FFOPS (5 per cent below consensus) was offset by a strong start to 2025 with year-to-date production having averaged 195mboe/d,” said Mr. Hulshof. “With 2025 guidance up for review towards mid-year, we believe an upward revision may be in the cards, especially with Cold Lake performing above expectations. SCR announced a 4-per-cent dividend hike, inline with its expectations for production growth.”
* Canaccord Genuity’s Carey MacRury raised his target for Triple Flag Precious Metals Corp. (TFPM-T) to $31.50 from $29 with a “buy” rating. The average is $29.97.
* KBW’s Tim Switzer cut his Versabank (VBNK-T) target to $22, below the $24.17 average, from $27 with an “outperform” rating.