Monday’s analyst upgrades and downgrades

Inside the Market’s roundup of some of today’s key analyst actions

National Bank Financial analyst Don DeMarco upgraded his rating on Lundin Gold Inc. (LUG-T) to “outperform” from “sector perform”, citing expectations that the company will enjoy peer-leading free cash flow yields this year.

His price target rose to C$27.75 from $25.25. That’s based on an enterprise value 7 times EBITDA over the next 12 months, up from 6.5 times, which was adopted because of National Bank expectations for higher gold prices.

“Peer-leading consensus free cash flow yield is at the ‘tip of the spear’ of our thesis, further backed by (i) a robust operational outlook over short-, medium- and long-term horizons; (ii) strong balance sheet; (iii) catalysts on deck; and (iv) valuation,” Mr. DeMarco said in a note to clients. “For us, the latter has been the long-standing impediment to an upgrade, now more compelling against a constructive gold tape.”

In the short term, he said a strong operational start to 2024 is expected to continue into the second quarter of this year and beyond, with second half 2024 throughput increasing to 5,000 tons per day from 4,500 tpd by year-end following completion of the Process Plant Expansion project.

In the medium term, “the three-year outlook shows production trending higher into 2025/26, primarily on an increase in throughput and recoveries,” he said. That could assist with paying back debt, dividend hikes, share buybacks and further exploration programs, he said.

The average price target on Lundin is C$18.20, according to LSEG data.

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Bernstein analyst David Vernon downgraded Canadian National Railway Co. (CNR-T) to “market-perform” from “outperform” and cut his price target to C$179 from C$195, citing cost pressures and strike risks.

His new price target is modestly below the analyst average of C$182.02.

“Rail stocks have taken a bit of a beating in 2Q, as the market has grappled with mixed signals and pushed out rate cut expectations,” Mr. Vernon note. “A slower macro recovery paired with a trucking market that’s proven sluggish in its tightening have created a recipe for investor reluctance to buy into the rails. The stocks are de-rating into bad market conditions.”

While that’s often a good time to buy the railroads that are fundamentally strong businesses in the long run, CN is an exception, he said.

“The company seems stuck for the near term on 2Q cost pressure and potential intermodal book around due to strike risk,” Mr. Vernon said.

He’s more upbeat on Canadian Pacific Kansas City (CP-T), however, and raised his target price on that stock to C$122 from C$118

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RBC analyst Walter Spracklin has bumped up his second-quarter earnings estimates for Cargojet Inc. (CJT-T) on the back of a recently announced three-year agreement to provide scheduled charter services for Great Vision HK Express, which he believes will capitalize on increased eCommerce demand out of China.

“We expect this deal, which utilizes current capacity, to be a meaningful driver of operating leverage during the remainder of the year, in addition to a more general potential inflection in eCommerce volumes flagged by FedEx last month,” he said.

“We expect focus in Q2 to be on volume trends given recent agreements and commentary from FedEx as well as on the margin outlook,” he added.

His 2025 earnings estimates increased to $375-million from $361-million, above consensus of$357-million.

He raised his price target on Cargojet to C$189 from C$182 while maintaining an “outperform” rating.

The average analyst price target is C$156.91.

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RBC analyst Walter Spracklin downgraded Stella-Jones Inc (SJ-T) to “sector perform” from “outperform”, commenting that the risk-reward is “well-balanced” at current share price levels.

His price target was maintained at C$94. The average analyst target is C$93.14.

“We view Stella-Jones as well run, with exposure to solid long- term trends in infrastructure investment. However, with the company’s valuation now reaching the top end of its five-year range, we see these trends as being appropriately reflected at current levels,” the RBC analyst said in a note to clients.

“Moreover, we view new pole capacity coming online during the remainder of the year across the industry as a potential risk to pricing looking ahead, which could weigh on revenues and margins into 2025. Net-net, we view solid volume tailwinds as being offset by pole pricing risk as well as valuation,” he said.

His second quarter EBITDA estimate increased to a Street high $202-million (from $193-million), above consensus of $194-millionm on indication the demand environment is solid in the quarter.

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UBS analyst Timothy Arcuri raised his price target on Nvidia Corp. (NVDA-Q) to US$150 from US$120 while reiterating a “buy” rating.

“Our supply chain work points to a growing order pipeline for Blackwell NVL systems just as planned industry CoWoS [Chip-on-Wafer-on-Substrate] capacity steps up again,” Mr. Arcuri told clients. “We now believe EPS of about $5 could be doable for calendar year 2025 as the order pipeline for NVL72/36 systems is materially larger than just two months ago as hyperscaler budgets for 2025 firm up.”

“This comes as sentiment on the stock – though still strong – has faded somewhat in recent weeks, creating more of a ‘wall of worry’ that should be ultimately healthy if our outlook materializes,” the UBS analyst added.

UBS estimates for Nvidia have consistently been well ahead of Street, but supply chain checks suggest more upside, the bank said. Its calendar year 2025 revenue estimates rose 12 per cent to US$204-billion, well above the Street consensus of $161-billion.

The average analyst target is US$130.68.

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Among other analyst actions:

Act Energy Technologies Ltd (ACX-T): ATB Capital Markets adjusts PT to C$10.5 from C$1.5 to reflect stock consolidation

Boralex Inc (BLX-T): National Bank of Canada raises target price to C$46 from C$43

First Quantum Minerals Ltd (FM-T) Jefferies raises target price to C$23 from C$19.50; Morgan Stanley cuts to “equal-weight” from “overweight”

Teck Resources Ltd (TECK-B-T): Jefferies raises target price to C$85 from C$80

Alphabet Inc (GOOGL-Q): Wells Fargo raises target price to US$187 from US$168

American Express Co (AXP-N): JP Morgan raises target price to US$268 from US$240; KBW raises target price to $280 from $265

Charles Schwab Corp (SCHW-N): KBW raises target price to US$84 from US$76 and upgrades rating to “outperform” from “market perform”