Inside the Market’s roundup of some of today’s key analyst actions
RBC Dominion Securities analyst Drew McReynolds sees an improving advertising environment providing a “constructive backdrop” across the Canadian media industry ahead of fourth-quarter 2024 earnings season.
“At current valuations, we continue to see decent entry points for most stocks in our diversified media coverage provided the ongoing improvements in advertising and the content cycle continue and a soft landing remains intact,” he said. “Our best ideas are VerticalScope and Cineplex.”
In a research report released Wednesday, Mr. McReynolds expressed a preference for companies with digital advertising exposure, believing the recovery “should continue while content buyers have become more selective.”
“Following a relatively underwhelming 2022 and 2023 for most stocks in our diversified media coverage, 2024 proved to be a much better year for Canadian media stocks with six stocks in our coverage outperforming the relatively strong 22-per-cent total return by the S&P/TSX Composite, led by VerticalScope (up 126 per cent), WildBrain (up 51 per cent), and Cineplex (up 46 per cent). Given what appears to be a cyclical tailwind for advertising spend and a soft landing for the North American economy, we favour stocks with exposure to renewed growth in digital advertising (VerticalScope, Cineplex, Stingray, illumin) driven by broadening category strength and firmer programmatic CPMs. Although most of these stocks performing relatively well in 2024 with valuations moving off the cyclical lows in 2023, we believe current valuations remain reasonable with potential for further multiple expansion and share price appreciation should the recovery in advertising and content demand pick up speed through 2025 and into 2026.
“We believe the recovery in advertising spend that begin in earnest in Q3/24 accelerated in Q4/24, with most companies in our coverage expecting a stronger advertising market in 2025 assuming a soft landing for the North American economy. RBC Economics forecasts the continuation of modest real GDP growth in Canada in 2025 and slightly stronger growth in the U.S.—both outlooks are consistent with a soft landing. For the Canadian advertising market, we expect strength in digital advertising driven by both broader category strength and firmer programmatic CPMs to be offset by continued secular headwinds for select traditional advertising segments (television, radio, print). For the U.S. in 2025, MAGNA forecasts: (i) a moderation in non-cyclical advertising growth year-over-year to 7.4 per cent (from up 9.0 per cent in 2024); and (ii) digital advertising growth of up 9.4 per cent to mitigate a decline of 1.8 per cent for traditional advertising (television, audio, publishing, outdoor, cinema). This outlook is generally consistent with RBC Capital Markets’ recent outlook/channel checks ... Contentwise, the recovery post-U.S. guild strikes in 2023 remains subdued, with only modest growth in content spend expected for 2024 and 2025 as content buyers have become more selective.”
After updating his forecast for the group, Mr. McReynolds made a pair of target price adjustments:
* Thomson Reuters Corp. (TRI-N/TRI-T, “outperform”) to US$177 from US$173. The average on the Street is US$171.17, according to LSEG data.
“With further upward revisions to 2024 organic revenue growth guidance through the year that we believe set the stage for 7–8-per-cent consolidated growth in 2025 and 2026, Thomson Reuters continues to meet rising expectations,” he said. “We would not be surprised to see modest upward revisions to the current 2025 outlook, with the impact of recent acquisitions (Pagero, SafeSend) and divestitures (FindLaw) accretive to consolidated organic revenue growth.”
“At current valuation (FTM [forward 12-month] EV/EBITDA of 25.6 times), we believe the bar to deliver consolidated organic revenue growth in excess of 6 per cent has risen with the organic revenue growth trajectory through 2025–26 now taking centre stage. While we remain patient for more timely and/or attractive accumulation points, we believe current valuation levels (i.e., 25 times FTM EV/EBITDA) are fundamentally justified provided that: (i) management meets or exceeds a 7–8-per-cent organic revenue growth trajectory by 2026 without meaningful changes to the company’s current margin, capex, and FCF conversion profile; and (ii) solid execution on the GenAI playbook continues with little change to the current GenAI narrative including perceived opportunities and risks. With further upward revisions to 2024 organic revenue growth guidance through the year that we believe set the stage for 7–8-per-cent consolidated growth in 2025E and 2026E, Thomson Reuters continues to meet rising expectations.”
* VerticalScope Holdings Inc. (FORA-T, “outperform”) to $17 from $16. Average: $14.69.
“Consistent with our mid-2020s content inflection period, we believe VerticalScope is well positioned to benefit from what is now rising demand for authentic content in a proliferating GenAI-driven content environment that will necessitate much more sophisticated personalization,” he said. “While earnings have not been immune to lingering macro headwinds that first emerged in 2023, we believe this structural shift alongside what is now a cyclical advertising recovery sets up for accelerating earnings growth in Q4/24 and through 2025. Against this backdrop, we continue to believe that current valuation levels represent an attractive buying opportunity given solid execution, new product traction, accretive tuck-in M&A potential, and a highly profitable and FCF generative business model.”
His target for Cineplex Inc. (CGX-T, “outperform”) remains $13, which is 58 cents under the average.
“We believe a strengthened theatrical release window, added film supply from streaming platforms, resilient consumer demand, and renewed momentum within diversification businesses (location-based entertainment, media) have bolstered Cineplex’s earnings power and visibility heading into a stronger box office in 2025 and 2026,” he said. “At a FTM EV/EBITDA multiple of 7.3 times versus an historical range of 6.0–13.0 times and 7.5 times for Cinemark, we continue to see value in the shares and see value relative to peers given Cineplex’s higher-growth and more diversified and differentiated asset mix, stronger competitive position, and potential for noncore asset sales, enhanced capital returns, and/or strategic optionality.”
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Desjardins Securities analyst Chris MacCulloch introduced his 2026 estimates for Canadian energy companies on Wednesday after adjusting his commodity price deck to reflect the “increased likelihood” of U.S. tariffs from the Trump administration.
“Specifically, we have widened our 2025 differential assumptions to reflect the impact of a 10-per-cent tariff, which we expect to be partially absorbed by producers, with offsetting support from a weakening loonie,” he said. “Unfortunately, the most damaging aspect of a potential trade war on a US$150b cross-border trade relationship for energy products will likely be on investor sentiment for Canadian oil & gas equities to the extent that it drives capital flight from a sector which only recently began to recover from previous policy errors.
“Looking beyond trade wars, which we expect will prove temporary, we continue to view the sector as attractively valued, both in absolute terms and relative to US peers, with strong balance sheets providing additional protection from commodity price volatility. Our top picks remain CVE and ARX. We also highlight SU, IMO, TOU, VET, TPZ and FRU as providing attractive diversification in the event of a trade war.”
While the magnitude of potential tariffs remains unclear, the analyst thinks it’s “now prudent to begin factoring them into our estimates, particularly to the extent that the federal government could apply retaliatory export taxes on cross-border energy flows if the sector receives a carve-out.”
“Ultimately, we expect a potential trade war to prove relatively short-lived given the highly integrated nature of the North American energy sector, which is why we have factored in only a 10-per-cent tariff for roughly six months,” he aded. That said, we expect producers to absorb at least 50 per cent of the incremental cost of tariffs with respect to Canadian oil exports to the US and natural gas exports to eastern markets, which contributed to our widening of 2025 WCS (to US$17.50/bbl from US $12.50/bbl), Edmonton Par (to US$7.50/bbl from US$3.00/bbl), Edmonton condensate (to US$5.00/bbl from US$1.00/bbl) and AECO (to US$1.75/mcf from US$1.20/mcf) differential assumptions. However, the financial impact of tariffs is partially offset by a significant weakening of our 2025 Canadian dollar forecast (to US$0.70/C$1 from US$0.74/C$1).”
With his changes, Mr. MacCulloch made one rating revision, upgraded MEG Energy Corp. (MEG-T) to “buy” from “hold” based on an improved return to his target, which slid to $29 from $30.50. The average is $31.93.
“We are upgrading MEG to Buy–Average Risk (from Hold–Average Risk), reflecting a more attractive return profile vs our revised $29.00 target (was C$30.50) following an extended period of relative sector underperformance,” he said. “While acknowledging that the company is fully exposed to potential U.S. tariffs stemming from its heavy oil–weighted production base and reliance on Canadian condensate supplies, which could be subject to retaliatory tariffs, we believe the market has now priced in considerable downside risk and is unduly discounting the sustainability of the business model and organic growth opportunities. After achieving its US$600-milion net debt target last fall, MEG is well-protected from commodity price volatility, with a 2026E strip D/CF of 0.5 times and an all-in corporate breakeven of US$53/bbl. Given the strengthened balance sheet, MEG is now returning 100 per cent of FCF to shareholders through the base dividend (1.7-per-cent yield) and share buybacks, the latter of which are expected to retire 10 per cent of outstanding shares in both 2025 and 2026 at current strip prices. Meanwhile, the company is also pursuing organic growth through disciplined capital investment whereby it plans to gradually ramp Christina Lake productive capacity to ~135 mbbl/d by 2028 (from 110 mbbl/d currently). Finally, while it is perhaps less immediate, we continue to view MEG as an attractive eventual takeover target for a larger producer seeking additional scale in the Canadian oil sands through a top-quartile, unencumbered asset with a long reserve life at Christina Lake.”
The analyst made these target adjustments for large-cap stocks in his coverage universe:
- Arc Resources Ltd. (ARX-T, “buy”) to $34 from $35. Average: $32.78.
- Canadian Natural Resources Ltd. (CNQ-T, “buy”) to $53.50 from $57.50. Average: $55.75.
- Cenovus Energy Inc. (CVE-T, “buy”) to $28 from $30.50. Average: $30.
- Imperial Oil Ltd. (IMO-T, “hold”) to $99 from $98. Average: $101.51.
- Suncor Energy Inc. (SU-T, “buy”) to $68.50 from $66. Average: $61.85.
- Tourmaline Oil Corp. (TOU-T, “buy”) to $80 from $77. Average: $79.11.
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TD Cowen analyst Mario Mendonca sees “strong” underlying fundamentals across the personal and commercial insurance industry heading into fourth quarter 2024 earnings season, particularly in personal lines.
“Strong fundamentals are evident in our Q4/24E estimates where we have IFC’s & DFY’s personal lines underlying claims ratios remaining stable (DFY) to declining (IFC),” he said. “In commercial lines, we see a more cautious approach to growth from IFC, while for DFY, we forecast 13-per-cent growth year-over-year. In personal lines, firm pricing conditions support improved competitive positions for both IFC and DFY, good top line, and attractive combined ratios.
“Our estimates for this quarter and looking forward, do reflect a moderation in net investment. This is true for all three insurers, TSU in particular, where we expect balance sheet growth to slow in line with moderating top line growth. Conversely, we expect a light quarter from the perspective of CAT losses, especially in comparison to last quarter. We do not expect the California firers to result in material claims for the insurers. For both TSU and IFC, California property CAT exposure is limited.”
In a research report released Wednesday, Mr. Mendonca pointed to four themes for investors to watch over the coming weeks: “a) strong underlying conditions, esp. personal lines, while commercial lines top line continues to moderate, b) slower growth in investment income driven by lower rates, c) modest CAT losses, and d) moderating top line growth in TSU’s U.S. Programs and elevated charges from exited lines.”
With his forecast largely falling in line with the Street’s expectations, the analyst made a pair of target adjustments:
* Definity Financial Corp. (DFY-T, “hold”) to $60 from $59. The average on the Street is $58.90.
“IFC [”buy” rating and $300 target] and DFY have delivered good relative performance over most time periods despite elevated CAT losses in 2023 and Q3/24,” he added. “While we remain positive on the P&C insurance industry, we continue to believe that valuation is looking stretched at this time, as it is for most financials. At 2.9 times for IFC and 2.1 times for DFY, P/B valuations are near peak levels, and reflect strong (or improving for DFY) ROE and book value growth. Reflecting the stretched valuations, we downgraded DFY to Hold from Buy on March 22 entirely reflecting the diminished upside to our target price. We continue to rate IFC Buy.”
* Trisura Group Ltd. (TSU-T, “buy”) to $50 from $52. The average is $56.89.
“For TSU, slowing top line growth in the U.S. and a material charge for exited lines (U.S. programs) could limit upside in the near term,” he said. “We expect the Q4/24 charge to reflect a pulling forward of charges that would otherwise have been reported throughout 2025. A sustainable 18-per-cent ROE (and the book value growth this implies) argues for a materially higher P/B than the current 2.3 times awarded the stock. We continue to rate TSU BUY.”
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Following Tuesday’s premarket earnings release, BMO Nesbitt Burns analyst Tamy Chen upgraded Metro Inc. (MRU-T) to “outperform” from “market perform” previously, citing to “several favourable factors.”
“The stock pulled back following FQ1/25,” she said.” Medium-term company fundamentals remain intact. We recently increased our food inflation outlook, which combined with the known expectation for slowing population growth leads us to assume largely stable sector dynamics.
“Lastly, we are concerned by the escalating tariff rhetoric, and should that scenario unfold, we believe investors should have exposure to a high-quality staple name.”
Ms. Chen’s target rose to $96 from $92. The average is $95.
Elsewhere, Scotia’s John Zamparo raised his target by $2 to $100 with a “sector outperform” rating.
“We consider [Tuesday’s] 3-per-cent sell-off an unfair reaction to what was, in our view, a net-neutral quarter which then received the benefit of positive messaging on EPS growth (albeit from tax rates),” he said. “These types of moves rarely happen for MRU, typically just 1-2 times per year. Management’s commentary on tax rates moves our EPS forecasts up by 1.5 per cent this year and next; we now project a CAGR [compound annual growth rate] of 12.5 per cent through F2026. We see Metro as well-positioned for what could become a more challenging environment for consumer spending, particularly as value-seeking behaviour persists.”
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After Freedom Mobile “slightly” increase its pricing for new activations, TD Cowen analyst Vince Valentini said he has “confidence” to raise his 2025 revenue and earnings forecast for Quebecor Corp. (QBR.B-T).
“Freedom Mobile has increased its most widely featured price point to $39/60GB from $35/50GB, which we view as the final piece of the puzzle with regards to a shift back to slightly more disciplined pricing across both the wireless and broadband industries in Canada so far in 2025.,” he said.
The analyst said the change from the Montreal-based company is important in both the race to acquire market share in the competitive market and to calm investor concerns.
“In recent weeks, we have seen internet price increases either implemented or announced by all of Videotron (QBR), Bell, Rogers, and TELUS, and we have seen the big three incumbent wireless carriers remove $34 boxing week promotions from their Virgin, Fido, and Koodo flanker brands,” he noted. “Flanker prices initially jumped to $45, and they then reset to $40. We are cautiously optimistic that the inflection higher in Freedom’s advertised rates will motivate the incumbent flankers to go back to $45 for their lowest priced big data bucket plans on the websites (with various in-store, winback, and other targeted offers fully expected to be available at slightly lower than what shows on the sites). The operators have been signaling that they would seek better pricing discipline and ARPU [average revenue per user] growth in 2025 (in part owing to the well understood reality that population-driven volume growth is likely to be much lower in the next two years than it was in the past two years), and we believe investors have been waiting for evidence that QBR/Freedom would participate in this process.”
Mr. Valentini predicted that “evidence” could “spark a relief rally” in Quebecor, leading him to become “a bit more optimistic” with both estimates and target for the company’s shares, which rose by $1 to $40 with a “buy” recommendation. The current average on the Street is $37.58.
“Quebecor continues to effectively manage both capex and FCF, as it expands both revenue and EBITDA as a result of its acquisition of Freedom,” he said. “In time, we are confident that QBR will accentuate Freedom’s quality with marketing initiatives, as opposed to relying on pricing. Meanwhile, Quebecor can continue to expand through a potential MVNO [mobile virtual network operator] offering, its Fizz wireless brand and bundling opportunities. QBR.B shares continue to trade at a discount to peers on both an EV/EBITDA and P/FCF basis. As such, we reiterate our Buy rating.”
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BMO Nesbitt Burns real estate analyst Tom Callaghan initiated coverage of a trio of long-term care equities on Wednesday:
* Chartwell Retirement Residences (CSH.UN-T) with an “outperform” rating and $18 target. The average is $18.22.
Analyst: “As the largest public player in the Canadian seniors housing space, and the sole player with virtually a complete focus on private-pay retirement residences, we expect CSH will be the primary beneficiary of the attractive fundamental picture (improving occupancy, limited new supply, and increasing demographic tailwinds) we see playing out over the coming years.”
* Extendicare Inc. (EXE-T) with a “market perform” rating and $11 target. Average: $11.
Analyst: “Following strong improvements in operating metrics within the LTC and home health businesses over the past 12-18 months, EXE’s shares have delivered leading price performance amongst the Canadian seniors over the TTM [trailing 12 months]. While we see potential for valuation to re-rate higher over time as EXE expands, capital light-income streams and advances its LTC redevelopments, our neutral rating speaks to 1) higher total returns elsewhere in our group, and 2) a current preference for private-pay retirement exposure.”
* Sienna Senior Living Inc. (SIA-T) with an “outperform” rating and $17 target. Average: $18.72.
Analyst: “Our positive stance on Sienna speaks to the company’s exposure to the higher-growth private-pay retirement space, an improved outlook within the LTC segment (post funding increases), and a competitive dividend yield of 6.2 per cent. Amid the recent pullback in shares, we think valuation screens as quite reasonable.”
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Coming off research restriction following Healwell AI Inc.’s (AIDX-T) $55-million financing to support its $165-million acquisition of New Zealand’s Orion Health Holdings Ltd., Ventum Capital Markets analyst Rob Goff named the Toronto-based company to the firm’s “2025 Top Picks Portfolio.”
“The acquisition and financing together strengthen the Company’s ability to acquire where its unique platform and partnerships draw elite partners and revenue synergies positively recalibrate on-strategy acquisition economics,” he said. “In this mode, Orion strengthens organic, and inorganic prospects while the financing brings flexibility.
“Furthermore, the acquisition adds critical scale, positive free cash flow, and geographic and revenue synergies. Orion contributes valuable data, clients, and distribution, accelerating organic growth and enhancing HEALWELL’s potential for future acquisitions with a strengthened revenue synergy profile.”
Mr. Goff reiterated his bullish view on its growth prospects, “driven by its AI-powered patient identification and prognostic care solutions, integrated with its Electronic Health Records (EHR) and Contract Research Organization (CRO) services.”
“This unique portfolio is further strengthened by its alignment with WELL Health (WELL-TSX, BUY, C$8.00 PT), which offers access to 30 per cent of Canadian clinics and a strong U.S. presence, creating significant upselling opportunities,” he said. “We look for Orion to positively recalibrate both organic and inorganic growth while the on-strategy, accretive acquisition brings critical scale (data, distribution) and free cash flow.
“HEALWELL’s AI capabilities not only drive direct revenue but also enhance its partner relationships. The Company’s MSA client list includes 7 of the top 10 global pharma companies, such as Johnson & Johnson (JNJ-NYSE, Not Covered) and AstraZeneca (AZN-LSE, Not Covered), underscoring its industry credibility. Access to capital and prospective clients is fundamental to our bullish view toward HEALWELL’s aggressive acquisition mandate. The impressive roster of MSA agreements, unique data capabilities (access and information extraction) and clinic reach represent a strong magnet for prospective acquisition partners.”
Believing its organic and inorganic growth will “add significant scale,” Mr. Goff sees the potential for a positive revaluation for its shares, raising his target to $3.40 from $3.20 with a “buy” rating. The average on the Street is $3.86.
“With advancing scale, we see HEALWELL broadening its investor appeal and drawing more references to Tempus who has a similar strategy to build out its healthcare AI capabilities drawing on its access to primary data and with strong distribution,” he said.
In a separate note, Mr. Goff bumped his Well Health Technologies Corp. (WELL-T) target to $8 from $7.50 with a “buy” rating following a corporate update an his Healwell change. The average is $8.57.
“The update focused on WELL’s capital allocation strategy, highlighted strong organic momentum, and released that acquisitions completed since December 2024 will add $100-milllion in annualized revenue in 2025,” he said. “The update presented a bullish outlook for ongoing organic growth and inorganic growth with additional depth in its M&A pipeline The HEALWELL issue along with the corporate update both serve to highlight WELL’s strategic alignment for organic and inorganic growth.”
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In other analyst actions:
* BMO’s Raj Ray downgraded Galiano Gold Inc. (GAU-T) to “market perform” from “outperform” with a $1.50 target, down from $2.50. The average is $3.50.
“Galiano reported an updated 5-year outlook for its Asanko Gold Mine (AGM) in Ghana. Management has looked to simplify the mining sequence and reduce operational risks,” he said.
“However, the result is lower production and higher costs and capex over the next five years. While we still consider Galiano a discounted stock, the recent operational underperformance and the muted near-term free cash flow (FCF), means that consistent execution will be needed to attract investor interest.”
* RBC’s Douglas Miehm lowered his Bausch + Lomb Corp. (BLCO-N, BLCO-T) target to US$22 from US$23 with an “outperform” rating, while Stifel’s Thomas Stephan cut his target to US$18 from US$19 with a “hold” recommendation. The average is US$20.61.
“BLCO will report Q4/24 results on February 19,” Mr. Miehm said. “We estimate Q4/24 revenue of US$1,251-million (consensus. US$1,257-million) and adj. EBITDA of US$258-million (consensus US$257-million). Q4/24 will continue to be influenced by FX headwinds (RBC estimate: $17-million). Operationally, we expect the focus to be on the 2025 guidance, the company’s DED Rx drugs (Miebo/Xiidra) and new launches. We revise our estimates to account for IQVIA TRx trends (Xiidra & Miebo) and updated FX moves. We lower our target to $22 (-$1) as we reduce the sale scenario weighting to 60 per cent (from 75 per cent previously) and incorporate the updated multiples of comps.”
* After its fourth-quarter assets under management came in “a little light,” Scotia’s Phil Hardie cut his Fiera Capital Corp. (FSZ-T) target to $10 from $10.50 with a “sector perform” rating. The average is $10.04.
“Fiera offers a high degree of diversification by business line and AUM, and an attractive 10-per-cent dividend yield,” he said. “That said, given lingering uncertainties in the market outlook, we see better risk/reward opportunities across our coverage universe.”