Inside the Market’s roundup of some of today’s key analyst actions
RBC Dominion Securities analyst James McGarragle named Air Canada (AC-T) his “top investment idea” on Wednesday, predicting a “meaningful” free cash flow inflection in 2028 and 2029.
“While a lot can happen over the next 3-4 years, and we therefore discount heavily our out-year FCF estimates, strong operational performance in H1/25 despite a significant drop in transborder traffic gives us increased confidence in management’s ability to execute longer-term,“ he explained. ”Moreover, we expect this ramp in FCF to be largely driven by a drop in capex in 2028 and 2029, and therefore less sensitive to any changes in the macro.”
In defying the back-to-work order, CUPE took a calculated risk that paid off
In a research report released before the bell, Mr. McGarragle said he views Air Canada’s out-year FCF inflection as “compelling”, projecting FCF yields of 40 per cent and 60 per cent on his 2028 and 2029 estimates, respectively.
“That said, we acknowledge these estimates need to be discounted heavily given a lot can happen over the next 3-4 years. However, Q1 and Q2 results give us increased confidence in the team’s ability to navigate an uncertain outlook, and we see risk/reward skewed heavily toward reward,” he noted.
“Speaking of rewards...we see a $100 upside scenario. As mentioned above, Air Canada shares yield 60 per cent on our 2029 FCF estimate. Applying a 13 times FCF multiple to our 2029 estimates and discounting back implies a $100 share price. Key here is that the biggest driver of this out-year FCF inflection is lower capex, which we see as less sensitive to macro uncertainty.”
The analyst did acknowledge he sees “less in the way of near-term catalysts” following the flight attendant labour dispute, but he pointed to “a trade agreement, pick-up in Transborder, or consumer strength as potential events that could get Air Canada stock moving higher.”
“Longer-term, however, we see the pricing in of this out-year FCF inflection as a significant catalyst,” he said. “The timing of when this will occur is uncertain in our view, but we believe investors should be positioned in AC shares ahead of any such move because as we have seen with other companies in our coverage re-ratings can occur quickly and sometimes unexpectedly.
“Adjusting Q3 estimates for strike. We are adjusting lower our Q3 estimate for the impact of the strike. With Air Canada’s network shut down for oneweek, we estimate roughly a $550MM revenue impact (i.e. Q3 revenue pro-rated over the strike); and assuming mostly fixed costs except for fuel, a $400-million impact to EBITDA. Our Q3 estimate therefore decreases to $1.028-billlion (from $1.432-billion), with our out-year estimates unchanged.”
Maintaining his “outperform” recommendation for Air Canada shares, Mr. McGarragle reduced his target to $25 from $27 to reflect “higher debt as a result of the strike.” The average target on the Street is $25.29, according to LSEG data.
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TD Cowen analyst Brian Morrison predicts “further catalysts may slowly emerge” for BRP Inc. (DOO-T) following “attractive share appreciation” since the release of its first-quarter fiscal 2026 financial results in late May.
“We forecast an H2/F26 earnings inflection due to new product introduction/easing industry headwinds, an increase to F2026 consensus, a strengthening of its balance sheet, and if interest rates cooperate, a re-acceleration of earnings growth in F2027 that may support multiple expansion,” he said.
However, ahead of the Aug. 29 release of the Valcourt, Que.-based recreational vehicle manufacturer’s latest earnings report, Mr. Morrison warns it’s may be too early to get excited from an investing perspective, expecting BRP to be “in for another challenging quarter, courtesy of heightened industry pricing pressure to draw-down non-current inventory, and aggressive promotional activity inclusive of BRP to stimulate PWC sales/ clear elevated inventory.”
“This has resulted in outsized decremental margins in recent quarters that we see continuing in Q2/F26,” he add. “We believe this is understood by investors, and note our EBITDA/EPS forecast is in-line with consensus of $205-million/$0.46.”
“Industry inventory appears to have passed its peak that was a key to our May upgrade. Pockets remain that is an ongoing industry headwind, most notably for Seasonal products. It is our view in general, that OEMs are acting in a more rational manner that should ease the degree of promotional activity/impact from destocking gradually, commencing in H2/F26. BRP was an industry leader reducing channel inventory, as illustrated by its 21-per-cent reduction at the dealer level from its Q1/F25 peak level.”
Citing “gradually improving trends”, Mr. Morrison said he has increased confidence BRP is “nearing an earnings inflection, and that F2026 consensus may be revised higher.”
“Lower interest rates we believe are required to stimulate the next notable share price catalyst,” he added, raising his target for the company’s shares to $87 from $70 on multiple expansion, keeping a “buy” rating. The average is $71.50.
“BRP is an industry leader with strong management that generates positive FCF during downturns, that is allocated to innovation/new products and cost efficiencies. This positions BRP well upon a return to a ‘normalized’ industry environment, given its attractive base level or earnings. With heightened visibility on an earnings inflection point, and as improved industry dealer inventory levels should support a return to market share growth from new product introductions, we remain constructive upon BRP’s NTM [next 12-month] outlook. This supports our BUY recommendation,” he explained.
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Ahead of the start of third-quarter earnings season for Canadian banks next week, CIBC World Markets analyst Paul Holden said “earnings, as measured by ROE, are running below normal, but the direction of travel is positive.”
“We are increasing our EPS estimates ahead of FQ3 and also increasing our estimates for F2026,” he said in a report. “With the average P/E at 12.0 times (F2026 consensus) the shares are already embedding higher earnings.
“We continue to like TD as Street estimates remain modest and there are multiple earnings levers for TD to pull. RY is our other Outperformer and that stock has lagged on credit concerns following FQ2. We expect a better quarter for RY with FQ3.”
Mr. Holden made a series of target price adjustments in his coverage universe on Wednesday.
They are:
- Bank of Montreal (BMO-T, “neutral”) to $173 (Street high) from $156. The average is $159.79.
- Bank of Nova Scotia (BNS-T, “neutral”) to $90 (Street high) from $77. Average: $81.29.
- Laurentian Bank of Canada (LB-T, “neutral”) to $35 (Street high) from $33. Average: $29.70.
- National Bank of Canada (NA-T, “neutral”) to $151 from $147. Average: $149.08.
- Royal Bank of Canada (RY-T, “outperformer”) to $195 from $183. AverageL $193.71.
- Toronto-Dominion Bank (TD-T, “outperformer”) to $109 from $99. Average: $101.19.
“Despite ongoing uncertainty surrounding tariffs and a generally soft domestic economy, Canadian bank stocks continued to climb higher in FQ3,“ said Mr. Holden. ”Since May 30 (following the banks reporting FQ2 results) the Big 6 Canadian banks have traded 8.0 per cent higher on average (TSX Composite up 6.6 per cent) with NA the strongest performer at 11.2 per cent. Investors appear to be getting more comfortable with the risk level and are looking through near-term challenges into F2027. Valuations are currently high relative to historical levels, with the banks trading at an average multiple of 12.0 times on F2026E consensus. Further multiple expansion for most stocks in the group is not likely, in out view, and accordingly we expect relative performance will largely be driven by EPS growth/ROE expansion.
“The key themes we highlight in this edition include credit losses near a plateau, NII supported by NIM resilience, capital markets driving upside, excess capital being directed to share repurchases, and ROE upside as a yardstick for future potential EPS growth. ... We expect another very strong quarter for capital markets, which is driving the most significant portion of our FQ3 revisions. Additionally, positive trends in deposit growth and funding mix should be supportive for NII through NIM expansion, even with low loan growth.”
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In a research report released Wednesday titled At this price we’ll take a nibble out of the Big Apple, National Bank Financial analyst Matt Kornack initiated coverage of GO Residential REIT (GO.U-T) with an “outperform” recommendation, touting its “differentiated offering on both the quality and location attributes front.”
The American REIT completed its initial public offering on July 31 at a price of US$15 per unit. It was formed “to provide investors with an opportunity to invest in luxury high-rise multifamily properties (‘LHRs’) located in the New York metropolitan area and other major metropolitan cities in the United States.” It will initially own and operate a portfolio of five LHRs consisting of 2,015 luxury suites located in Manhattan.
"GO’s portfolio is unique in a number of respects including its primarily luxury high-rise offering on the east side of Manhattan in buildings with an average age of just 15 years (with three of the five buildings built within the last 10 years),“ he said. ”The quality of the offering is evident in high in-place average rents with the portfolio commanding over US$7.00 per sq. ft. or US$6,500 per month.
“Near-term opportunity to push rents to market, realize on renovation and suite conversion projects: Management has identified a near-term opportunity to capture 10-per-cent upside in rents in the next twelve months with an assumption of 4-per-cent growth thereafter as supply/demand dynamics in the NYC rental market justify above inflationary increases. In the medium-term the REIT can further bolster this growth through programs aimed at converting 1-bed and 2-bed suites by adding a partition wall to create an additional bedroom. 1 East River Place has value-add renovation opportunities that could add $8-million in revenues for a fairly modest investment of $16-20-million.”
Also seeing “favourable” residential market fundamentals in New York City, Mr. Kornack touted a higher yield versus its Canadian and U.S. apartment peers with an “attractive” implied cap rate.
“Given trading weakness on top of a discounted initial public offering, GO provides investors with a 5-plus-per-cent yield, with a 65-per-cent payout ratio,” he said. “When accounting for total capex, which is modest in light of the newer vintage of the portfolio, GO generates positive cash flow after servicing its dividend. An implied cap rate north of 6 per cent looks attractive given asset quality and geographic exposure.
“Aligned management team with an internal platform with room for scalability: The management team and retained interest holders own 35 per cent plus per cent of the stock providing alignment with unitholders. Asset and property management have been fully internalized, further limiting the potential for conflicts of interest and allowing investors to benefit from accretive future portfolio expansion.”
He set a target of US$15 per unit, implying an estimated total return of 24.1 per cent. The average is US$17.50.
“While structure and liquidity give us some pause, the valuation discount offered by current trading levels is compelling. The latter is true given asset quality, strong operating fundamentals in the NYC market and embedded potential near-term MTM opportunities. In time, if rewarded with a cost of capital that makes sense to grow, GO has a strong foundation upon which to expand. Ultimately, if things don’t work out in the public markets, investors own a portfolio of luxury assets in one of the world’s pre-eminent markets with deep buyer interest,” he said.
Elsewhere, CIBC World Markets analyst Dean Wilkinson gave GO Residential an “outperformer” rating and US$24 target.
“Our price target and rating reflect GO’s attractive long-term growth potential, the defensive characteristics of the apartment asset class, its position as the only public REIT with a focus on luxury high-rise (LHR) rentals in New York City (NYC), and a valuation that we consider extremely compelling,” said Mr. Wilkinson.
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Stifel analyst Ian Gillies is projecting Zedcor Inc. (ZDC-X) will enjoyed compound annual growth rates for revenue, EBITDA and EPS of 76 per cent, 81 per cent and 141 per cent, respectively, between 2024 and 2027, which he emphasized will make the stock “one of the fastest growing companies (with profitability) on the TSX and TSX Venture.”
“We believe this is a standout growth stock opportunity,” he said. “The company has proven out its technology and now has 1,882 units deployed in North America. We believe this unit count could grow to 17,597 units over the next 10-years. This growth is entirely predicated on new unit additions, as we anticipate pricing to remain flat in the U.S. so it can capture market share. The stock is expensive today (25.8 times 2025 EV/EBITDA) but reasonable in 2027 (9.3 times EV/EBITDA).”
In a research report released Wednesday, Mr. Gillies initiated coverage of the Calgary-based mobile surveillance and live security monitoring solutions provider with a “buy” rating, calling it “a core holding for small and mid-cap growth investors.”
“Zedcor’s offering some unique aspects that help create a competitive moat despite the physical offering seeming commoditized at first blush: one of Zedcor’s unique offerings is its monitoring solution, as most other security peers do not provide this after-market service,” he said. “A single employee can monitor 100-150 MobileyeZ given that the cameras being used have integrated AI technology to reduce false alarms. The company’s supply chain management and vertical integration also gives it a cost advantage, thus pricing flexibility.
“Zedcor is under penetrated in the U.S. and has a first mover advantage: the company only has locations in Houston, Denver, Phoenix and Las Vegas, which is driving 90-per-cent utilization on its 746 units in the U.S. We estimate that the top 15 major markets could generate demand for 15,000 units at full penetration. The market gets significantly larger once other mid and small sized population centres are considered. We believe this creates a significant growth opportunity. Canada could easily be a market that consumes 2,000 units or more.”
Seeing “impressive” free cash flow when scale is reaching and expecting return on equity to “rapidly expand,” Mr. Gillies set a target of $7 per share, exceeding the $5.33 average.
“The cost of superior growth is expensive now and cheap later: we believe ZDC has at least a five-year runway to add $20-25-million of EBITDA per annum and potentially more,” he said. “This sort of growth profile has manifested into an expensive 2026 estimated EV/EBITDA of 14.8 times but reasonable multiple of 9.3x in 2027E. We believe a high growth entity, with superior return metrics warrants a higher multiple in 2027E (which is supported by our DCF of $7.53/sh). We believe growth investors should view the current entry price as reasonable.”
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In other analyst actions:
* After updating his financial model to account for its US$1-billion Kansanshi gold stream agreement with Royal Gold and the refinancing of part of its senior notes due in 2027 and 2029, Desjardins Securities’ Bryce Adams bumped his target for shares of First Quantum Minerals Ltd. (FM-T) to $26, exceeding the $25.43 average, from $25 with a “hold” rating.
“We maintain our Hold–Above-average Risk rating as Cobre Panama uncertainty remains elevated, in our view,” said Mr. Adams.
* JP Morgan’s Jeremy Tonet raised his Gibson Energy Inc. (GEI-T) target to $25 from $24 with an “underweight” rating. The average is $26.46.
* To reflect its four-for-one stock split, National Bank’s Vishal Shreedhar reduced his Loblaw Companies Ltd. (L-T) target to $60 from $242 with an “outperform” rating. The average is now $61.20.
“We maintain a favourable view on L and recommend it as our preferred grocer supported by: (i) Benefits from improvement initiatives; (ii) Ongoing stable EPS growth and (iii) Favourable medium-term trends in discount and drug store (where L over-indexes),” said Mr. Shreedhar.