Tuesday’s analyst upgrades and downgrades

Inside the Market’s roundup of some of today’s key analyst actions
Expecting CI Financial Corp.’s (CIX-T) $4.7-billion deal to be privatized by Abu Dhabi-based Mubadala Capital, the alternative asset arm of Mubadala Investment Company, to receive shareholder support, TD Cowen analyst Graham Ryding lowered his rating for the Canadian independent asset manager’s shares to “sell” from “buy,” calling the offer “attractive.”
“The offer price implies a 33-per-cent premium to the pre-announcement price, which follows on from CI’s shares increasing 62 per cent year-to-date (pre-announcement),” he said. “The deal will require two-thirds support from votes cast, and a majority of minority votes. CI directors and executives, who represent 17 per cent of outstanding shares, are supporting the deal. The special meeting is expected to occur in January, 2025, and the deal is expected to close in Q2/25 (subject to court and regulatory approvals).
“CI’s board of directors, including a special committee of independent directors, is supporting the deal. The board and management of CI note this deal reduces execution risk. This appears to be in reference to management’s previously stated intention to surface value from U.S. Wealth (potential IPO) in order to pay off preferred equity liabilities by 2026. We agree that this offer reduces the risk around surfacing value from the U.S. Wealth business.”
Andrew Willis: Can Mubadala make money on U.S. wealth advisory after paying a premium price for CI Financial?
Mr. Ryding raised his target to $32 to reflect the offer from $28 previously. The average target on the Street is $30.08, according to LSEG data.
“Given the attractive offer, we believe investors should tender to the offer,” he concluded.
Meanwhile, other analysts making rating changes include:
* CIBC’s Nik Priebe to “tender” from “neutral” with a $32 target, up from $23.
“The acquisition of CI comes as a surprising development, but a welcome one for shareholders. We believe that investors will be pleased with the outcome considering: 1) the magnitude of the premium offered; 2) the strong run-up in the stock that preceded the announcement, and; 3) the implied transaction multiple, which is higher than the shares have traded in several years. We see a high probability of the transaction closing, and low probability of an interloper emerging. Overall, we believe this is an excellent outcome for CI shareholders and are changing our rating,” said Mr. Priebe.
* KBW’s Kyle Voigt to “market perform” from “outperform” with a $31.50 target, up from $28.
Elsewhere, others making target adjustments include:
* Scotia’s Phil Hardie to $32 from $26, keeping a “sector perform” rating.
“We see a high probability of the deal going through and expect shares to trade near the offer price,” said Mr. Hardie. “CI has been a divisive name among equity investors given a largely aggressive debt financed M&A expansion strategy to build out its U.S. wealth management platform. That said, we think this approach aligns quite well for a private equity player and believe that a unique aspect of the deal is that permanent capital being available to continue to fund the growth strategy. Management had noted the likely timing for a potential IPO of the U.S. business was in mid-2026. In that context, we think the proposed transaction provides publicly equity investors with a greater level of certainty for the timing and ultimate value being surfaced.
“The offer represents a significant premium to our one-year target price, and we think the valuation looks relatively fair. We see a competing bid as a low probability, but cannot entirely rule out the possibility given private equity’s recent interest in the U.S. RIA space.”
* Raymond James’ Stephen Boland to $32 from $27 with an “outperform” rating.
“Since this is a friendly deal with 17 per cent of the shares pledged from the board and management, we expect the deal to close,” said Mr. Boland. “We do believe the multiple is low for one of the largest independent asset managers in Canada and a fast-growing U.S. business. RIA businesses in the U.S. have sold at much higher multiples. However, it has been 3 years since the stock has traded above $30.00, so this should satisfy shareholders and insiders that may have some fatigue. The timing also avoids the future U.S. IPO and a more complicated structure.”
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RBC Capital Markets analyst James McGarragle raised his rating for Russel Metals Inc. (RUS-T) to “outperform” from “sector perform” on Tuesday, citing a discounted valuation, an improving steel environment and seeing further upside stemming from the integration of its recent acquisition of assets from Samuel, Son & Co.
“Furthermore, we are seeing early indication the industrial backdrop is turning, which we believe would act as a significant driver of earnings growth,” he added. “And if macro remains soft, we see downside as limited reflecting an already depressed valuation and a strong balance sheet, which positions Russel well in our view for further M&A or a pickup in repurchases.”
In a research report released Tuesday before the bell, Mr. McGarragle argued the direction set by the incoming Trump’s administration south of the border will be “beneficial” for the Toronto-based metals distribution company, pointing to policies that are “expected to be favorable for steel pricing (i.e. tariffs on imports), reshoring, manufacturing, and energy.”
“We heard during Q3 reporting that companies are seeing early indication the industrial backdrop is beginning to inflect and see that first hand in the data we track,” he said. “Key is that we see a better industrial/steel backdrop as representing upside to both estimates and valuation.”
He also touted potential gains from the summer deal for seven service centre in Western Canada and the Northeast U.S. from Samuel, seeing it “well positioned” to drive growth on upside from integration stemming frominventory management and the opportunity to free up additional working capital.
“We also see upside from additional M&A given the company’s solid balance sheet (0.3 times leverage),” he said.
While he lowered his fourth-quarter 2024 and first-quarter 2025 estimates to reflect lower steel prices, Mr. McGarragle raised his target for Russel shares to $51 from $45 based on what he perceives to be a “discounted” valuation. The average target on the Street is $50.92, according to LSEG data.
“Russel shares trade at approximately 11 times NTM P/E [next 12-month price-to-earnings] and at a 25-per-cent discount relative to peers (vs. the company’s 7-per-cent 10-year average premium),” he said. “Key is that our investment thesis is not predicated on an uptick in valuation, although each 1 times increase in our target multiple represents close to 10-per-cent implied upside off current prices. We view an inflection in steel pricing and/or an improvement in macro as catalysts for a higher multiple and view current valuation.”
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Scotia Capital analyst Maher Yaghi thinks the Street’s expectations for Canadian telcommunication companies are “still too high heading into 2025.”
“Current consensus estimates imply a view that wireless pressure should peak late this year with the rate of decline improving in 2025 with wireless ARPU [average revenue per user] only declining by 0 to 1 per cent year-over-year in 2025 on average for incumbents,” he said. “In a market where the CRTC continues to scrutinize wireless pricing and Freedom Mobile calling out incumbents in public such as their petition last week, we see little probability of a quick improvement in pricing. Our consolidated EBITDA forecasts imply 1 to 3-per-cent lower growth for 2025 vs consensus. This lower growth expectation is due to lower wireless ARPU and loading forecasts. We have lowered some of our valuation multiples and short/medium term DCF growth assumptions leading to lower target prices. We continue to believe that a more grounded street expectation on pricing is needed to put a long term bottom on stock valuations.”
In a note released Tuesday, Mr. Yaghi trimmed his targets for shares of four of the five companies in his coverage universe:
He maintained a $77.50 target for Cogeco Communications Inc. (CCA-T). The average is $78.25.
“At this point in time, Canadian telcos are mostly trading inline with their U.S. peers (ex TMUS) in the 6.5-7 times EBITDA multiple range while we are assuming a lower overall industry growth outlook,” he said. “If Quebecor decides to relent on their pricing strategy, due to more acute pressures felt in their wireline business which began to show in Q3, we could become more bullish on the Canadian sector however this would also make us question QBR’s long term wireless competitive sustainability. All in, we think 2025 will be another year of adjustments for the Canadian telecom sector which will hopefully push companies to divest of non-core assets, adopt a more asset light strategy when it comes to infrastructure usage and recenter focus on improving ROIC which has been declining over the last decade. The other factor that could make us more constructive on the sector includes a material pullback in long term interest rates in Canada, which was the main driver for the sector’s strong performance in Aug/Sept for example.”
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Ahead of the start of fourth-quarter earnings season for Canadian banks next week, CIBC World Markets analyst Paul Holden said he’s “become more positive” on their outlook, citing: “1) credit losses are near a peak and will start to decline at some point in F2025; 2) loan growth will accelerate in F2025; 3) regulatory capital positions are enabling EPS-accretive actions; and 4) there is upside to ROE expectations through F2026.”
“Key themes this quarter include peak PCLs, F2025 NII outlook, still-slow loan growth, solid capital markets and ROE upside potential,” he said in a report released Tuesday. ”We are observing early signs that we will be entering a more constructive year in F2025. There are signs of credit losses plateauing and demand for credit increasing, implying upside to F2025 consensus expectations. Rate cuts create a headwind for NIM while relatively firmer interest rates at the longer end of the curve are a positive, which will make the F2025 NII outlook so important.
“We are forecasting a challenging quarter for Q/Q EPS growth, notably with declines at BMO and TD. BMO is facing credit challenges while TD will see an earnings impact related to its U.S. AML issues. The largest difference between our EPS estimate and consensus this quarter is with BMO, which largely relates to PCL expectations. Our estimates are roughly 2 per cent below consensus for the Big 6 on average and 1 per cenyt below for the entire group.”
Projecting 4-per-cent year-over-year growth for the big banks on average and lower year-over-year earnings for the small banks, Mr. Holden raised his targets for shares of these banks:
Conversely, he lowered his target for shares of Toronto-Dominion Bank (TD-T, “outperformer”) to $93 from $96. The average is $85.81.
“The Big 6 banks, excluding TD, have traded up between 13 per cent (BMO) and 26 per cent (CM) since our last preview note,” he said. “TD is the only negative outlier, trading down 3 per cent. This compares to the S&P/TSX Composite which has advanced 10 per cent and the S&P 500 which has advanced 6 per cent over the same time period. Valuations, on average, have moved higher, which we believe signals investors are getting more comfortable with the outlook for credit losses. The next event that could trigger a meaningful move higher will be the F2025 outlook provided by the banks with FQ4 reporting. With respect to credit and NII performance in particular, a better-than-expected outlook could drive meaningful upside to estimates.
“Most of the Big 6 banks review their dividends concurrent with FQ4 results. We forecast dividend increases for BMO, NA, RY, and TD. BNS typically increases its dividend with Q2, not Q4. Consensus F2024 calls for 1-per-cent EPS growth, which is not supportive of outsized raises this year. We expect 2.5 per cent on average which includes an expected increase for TD. Year-to-date payout ratio is lowest for NA (41.2 per cent) and highest for BMO (58.6 per cent). CM, RY, and TD are all roughly 50 per cent. We expect smaller raises from BMO (earnings headwinds) and TD (AML challenges). NA and RY will likely report much stronger increases.”
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While he expects TerraVest Industries Inc. (TVK-T) to maintain its “steady growth trajectory” in 2026, National Bank Financial analyst Zachary Evershed lowered his recommendation for its shares to “sector perform” from “outperform” based on valuation considerations ahead of the release of its fourth-quarter results on Dec. 6.
“While both the business and management are unquestionably of high quality, valuation appears to now fully reflect M&A potential; after a 61.7-per-cent climb since our initiation (vs. S&P/TSX Composite Index up 12.1 per cent), we move to a Sector Perform rating and will await a better entry point,” he said.
Mr. Evershed said he continues to see the industrial manufacturer’s “dominant competitive position across products and regions to allow for pricing gains to carry flat or slight declines in volume on average.”
“On the profitability front, we flag that steel pricing has likely bottomed, and is set to flip from a tailwind to a headwind for the portion of the business not yet matching procurement to backlog (Highland Tank),” he said. “We believe 2026 will benefit however, from the continued integration of HT and AEP [Highland Tank and Advance Engineered Products], and what we anticipate to be a turnaround/restructuring of Argo within the Processing Equipment segment. On the balance, we forecast a 20.7-per-cent margin for 2026, a 40 basis points increase year-over-year.”
“With a clean balance sheet sitting at 1.4 times Net Debt/EBITDA and $250-million in dry powder, combined with the equity raise signaling interest in chunkier targets, we believe the company’s M&A appetite remains significant and TVK is likely to execute on transactions comparable to HT.”
After rolling his financial model to 2026, Mr. Evershed increased his target to $128 from $104. The average is $109.67.
“We highlight TerraVest’s likely inclusion within the S&P/TSX Composite Index during the December 2024 rebalance (approximately 0.33 million shares; ADV 6.27 tims; $39 million notional demand), which will be announced on December 6,” he added.
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TD Cowen analyst Brian Morrison expects the focus of BRP Inc.’s (DOO-T) third-quarter fiscal 2025 financial release on Dec. 6 to be squarely on pricing amid “soft” consumer demand and elevated inventory concerns “as OEMs make a concerted effort to reduce financial pressures upon the dealer network.”
“We see this process lasting at least into mid-2025 that should weigh upon BRP’s financial performance,” he said. “We believe visibility to a retail demand inflection point especially for Seasonal Products is required before reviewing our recommendation.”
Mr. Morrison is now projecting quarterly normalized EBITDA and earnings per share of $233-million and 86 cents, respectively. Both exceeded the Street’s expectations, however he emphasized his updated estimates r account for its Marine segment, which it put up for sale last month, as a discontinued operation.
“Consumer demand we believe remains challenged across the Powersport industry, with our key area of concern focused upon Seasonal Products,” he said. “This should weigh upon near-term financial performance as both Snowmobile and PWC, in our view, have the greatest inventory destocking requirements. This destocking strategy is impacting production rates across all product lines, that in tandem with promotional intensity, should result in materially lower year-over-year revenue/EPS and in turn margin decrements.”
“We anticipate ongoing progress on inventory reduction within the dealer channel especially for SxS’s. We are of the view, however, that inventory for PWC/ Switch ended summer at an elevated level. While ORV and snowmobile inventory should approach a supply/demand equilibrium by fiscal year-end, it is our view that snowmobile sales are off to a sluggish start to the winter. As such, we believe that the booking period for pre-season sales for F2026 Seasonal Products is likely to be weak and weigh upon earnings growth in F2026, in addition to ongoing PWC/Switch destocking requirements.”
Maintaining a “hold” recommendation for shares of the Valcourt, Que.-based company, Mr. Morrison cut his target to $81 from $95. The average is $90.28.
“We increased our F2025 financial forecast to reflect Marine as a discontinued operation, essentially moving its forecast annual loss to discontinued operation,” he said. “The lowering of our F2026 forecast reflects the impact of greater PWC destocking requirements than previously anticipated.”
“We see BRP as an innovative industry leader caught in the midst of a challenging industry inventory position and consumer demand environment. We believe the balance of channel inventory with retail demand should act as a catalyst to review our rating, and while we prefer to be early with our call, admittedly visibility into this dynamic and in turn a return to its “base earnings” remains limited at this time. While valuation is becoming compelling, we believe a Hold rating remains appropriate until clarity upon catalysts emerge.”
Elsewhere, Canaccord Genuity’s Luke Hannan cut his target to $80 from $88 with a “hold” rating.
“We remain confident in BRP’s long-term ability to capture market share through its industry-leading powersports portfolio and believe the gap between the company’s current earnings power and what we believe to be its long-term normalized margin (17-per-cent EBITDA margin) presents an attractive opportunity for investors willing to look past the uncertain near-term backdrop,” said Mr. Hannan. “We also believe the targeted inventory reductions are the correct long-term decision to protect dealer profitability while preserving margins and the company’s long-term growth algorithm. That said, we have elected to stay on the sidelines for the time being.”
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Touting its “underappreciated” free cash flow and deleveraging potential, TD Cowen analyst Sean Steuart named Cascades Inc. (CAS-T) to the firm’s “Best Ideas 2025″ list.
“With major capex in the rearview mirror, easing recycled fibre input costs, and end market tailwinds, we believe that CAS’ mid-term free cash flow potential is exceptional (expected average annual 2025 and 2026 yield of almost 16 per cent),” he said. “We expect that free cash flow will be directed towards balance sheet deleveraging, which should support a narrowing valuation discount for CAS versus peers.”
Mr. Steuart said his “constructive view” is built on “substantial positive” forecasts for free cash flow over the next two years, pointing to moderating capital expense expectations and “an improving earnings profile.”
“We expect these factors to support meaningful deleveraging over our forecast horizon,” he said. “With the Bear Island project complete and a better-optimized tissue segment, we believe CAS’ risk profile has improved. We expect that this will support a narrowing valuation discount to peers.”
“CAS’ free cash flow profile is among the best in our coverage universe, with expected yields of 19 per cent in 2025 and 12 per cent in 2026. We forecast that net debt/LTM [last 12-month] EBITDA will exit 2025 at 2.8 times versus a Q3/22 peak of 6.2 times. We forecast improved 2025 earnings tied to easing recycled fibre input costs (most notably old corrugated containers — OCC), better productivity across several operations (especially at the Bear Island containerboard mill), and improving price realizations for tissue and packaging products.”
Mr. Steuart has a “buy” rating and $14 target for Cascades shares. The current average on the Street is $12.50.
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In other analyst actions:
* TD Cowen’s Steven Green trimmed his Barrick Gold Corp. (GOLD-N, ABX-T) target to US$25 from US$26 with a “buy” rating. Other changes include: Bernstein’s Bob Brackett to US$27 from US$26.50 with an “outperform” recommendation and Canaccord Genuity’s Carey MacRury to $33.50 from $35 with a “buy” rating. The average is US$24.69.
“Barrick’s longer-term strategy continues to prioritize exploration and organic growth to sustain its gold production while downplaying M&A,” said Mr. MacRury. “In our view, M&A is a tool in the toolbox that can be used well or poorly but given Barrick’s size, we struggle to see the company sustaining its production over the long term via internal opportunities alone. Our BUY rating reflects Barrick’s gold production looking to be at an inflection point, strong balance sheet, and inexpensive valuation at 0.56 times NAV, versus the senior peer average of 0.62 times.”
* Raymond James’ Craig Stanley initiated coverage of Blackrock Silver Corp. (BRC-X) with an “outperform” rating and $1 target, exceeding the average on the Street by 2 cents.
“We believe BRC could be a potential acquisition target based on the following: (1) Tonopah West is one of the highest-grade, undeveloped project in North America owned by a junior containing only silver and gold; (2) With investors focused on political risk, a silver project in the U.S. could be coveted by producers. We note Nevada was ranked the #2 destination in the 2023 Fraser Institute Annual Survey of Mining Companies Investment Attractiveness Index; and, (3) Tonopah West’s resource and infrastructure outlined in the PEA are all located on patented mineral claims (private land), with permitting controlled only by state and county regulators. (Management has not commented on this possibility.),” he said.
* Ahead of the release of its 2025 guidance on Dec. 3, Raymond James’ Justin Jenkins raised his Enbridge Inc. (ENB-T) to $63 from $59 with an “outperform” rating. The average is $59.91.
“or EBITDA, our model stands a touch ahead of consensus — $19.6 billion versus the average at $19.5 billion,” he said. “Our model is actually running just slightly ahead of the EBITDA CAGR [compound annual growth rate] (7-9 per cent from 2023), with help from a solid base in 2024. For guidance brackets, we’d expect ENB’s typical $0.6 billion window — and we wouldn’t be surprised if our estimate is on the top end of the range (e.g., $19.0-19.6 billion). Given tax/interest rate headwinds, DCF growth is lower than EBITDA – and we model just over 2-per-cent growth to $5.72/share in 2025 (from 2024′s midpoint/estimate of $5.60). We won’t be entirely surprised if the 2025 guidance range is similar to 2024 ($5.40-5.80), though would be reasonable to assume slight growth from this year in our view.”
“Broader midstream sentiment remains quite positive — though ENB has lagged certain peers with a higher degree of leverage (or ‘pure play’ status) to the natural gas demand growth themes of LNG/AI/Power Gen,” he said. “We think the totality ENB’s business drivers remain fairly positive, especially versus long-range guidance. That said, to push the stock’s valuation back to its typical solid premium to the peer group, ENB but may need a bit of a jump-start to the story either internally (strong guidance, asset sales potential?) or externally (rates falling). We expect Liquids to be topical on basin growth and peer efforts to carve out that particular business. The broader gas/renewables business should also have favorable drivers — given the demand growth characteristics of LNG/AI/Power Gen noted above. All told, we think the ENB story remains solid, especially for ‘safer haven’ type money.”
* Morgan Stanley’s Alexandra Straton raised her Lululemon Athletica Inc. (LULU-Q) target to US$345, exceeding the US$320.79 average, from US$314 with an “overweight” recommendation.
* UBS’ Manav Gupta raised his Pembina Pipeline Corp. (PPL-T) target by $3 to $62, exceeding the $61.10 average, with a “neutral” rating.
* Desjardins Securities’ Jerome Dubreuil cut his Quisitive Technology Solutions Inc. (QUIS-X) target to 60 cents from 65 cents with a “buy” rating, while Canaccord Genuity’s Robert Young trimmed his target to 85 cents from $1 with a “buy” rating. The average is 62 cents.
“QUIS reported results which were broadly in line with expectations,” Mr. Dubreuil said. “The company reduced 2024 guidance, which is now much closer to consensus. Management indicated that customer readiness for AI activation remains an issue before demand for QUIS’s services can accelerate. The update has led us to lower our 2025 forecast as sales conversion takes time. Its 4.3 times 2025 EBITDA (5.7 times without PayiQ prefs) multiple still looks attractive for patient investors.”
* Raymond James’ Stephen Boland initiated coverage of Stack Capital Group Inc. (STCK-T) with an “outperform” rating and $12 target. The average is $12.50.
“Stack offers private investment opportunities through a public arrangement,” he said. “This combination provides early investment access traditionally afforded to accredited investors. Overall, investors may receive the benefits of a complete investment universe, unrestrained capital mobility, and are able to leverage the connections and experience of a reputable investment team.
“As rates start their descent from elevated levels, we see this as a catalyst for the company and its investments. With rates contracting and the cost of money decreasing, investors could see material upside for the company’s vintage investments, especially those entered during the rate hiking cycle.”
* In a report titled Give GenAI a TRI, but Wait for a Better Entry Point, Wells Fargo’s Jason Haas initiated coverage of Thomson Reuters Corp. (TRI-N, TRI-T) with an “equal weight” rating and US$165 target. The current average is US$176.46.