Friday’s analyst upgrades and downgrades

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

During the approaching third-quarter earnings season in Canada’s technology sector, RBC Dominion Securities analyst Paul Treiber expects “idiosyncratic organic performance to drive sentiment.”

“The performance of technology stocks has bifurcated into those viewed as ‘AI winners’ and those seen as ‘AI losers’,” he explained. Our U.S. Software team previewed calendar Q3 results and noted improving investor sentiment for software stocks, particularly within certain segments like cyber, AI, data/token flow and infrastructure (see notes here and here ). Additionally, they believe that the AI monetization ‘waterfall’ will eventually flow into applications, but this may be more of a 2H/CY27 story.

“Amidst this environment, we believe stocks in our coverage that deliver upside organic growth surprises are likely to experience upward valuation multiple re-ratings. Across our coverage, we forecast incrementally stronger organic growth in 2H/ CY26 compared to 1H/CY26.”

In a client report released before the bell, Mr. Treiber emphasized technology was the best-performing sector in the third-quarter, rallying 18 per cent versus just a 1-per-cent gain for the S&P/TSX composite index. The performance exceeds U.S. peers (up 7 per cent versus 2 per cent from the S&P 500). However, the S&P/TSX Info-Tech sub-sector is still down 3 per cent in 2026 (versus up 11 per cent for the TSX and a 28-per-cent gain for the S&P 500 Info-Tech sub-sector), which is its weakest year-to-date performance since 2022.

“Shopify’s rally helps lift the entire sub-sector in Q3. The S&P/TSX Info-Tech sub-sector is highly dependent on the returns of Shopify, which accounts for 59 per cent of the sub-sector,” he noted. “Shares of Shopify jumped 30 per cent in Q3. In addition to Shopify, 5 other stocks in the sub-sector rallied during the quarter. Notably, both Kinaxis and Descartes rose 17 per cent during the quarter, while Constellation was up 6 per cent. On a year-to-date basis, Shopify, which is down 8 per cent, remains one of the detractors to the performance of the S&P/TSX Info-Tech sub-sector. In total 6 of the 9 stocks in the sub-sector remain down year-to-date, despite Q3 rallies.”

Mr. Treiber named Ottawa-based Shopify Inc. (SHOP-Q, SHOP-T) as one of his “top picks” for the quarter. He has a “outperform” rating and US$200 target for its shares, which exceeds the US$177.95 average on the Street.

“We expect Q3 beat and raise. We believe Shopify’s Q3 results and Q4 guidance will exceed consensus by a similar magnitude as the TTM [trailing 12-month] average, driven by resilient U.S. e-commerce spending, continued market share gains, and cost discipline/operating leverage. With sustained strong growth and growing recognition as an AI winner, we expect Shopify’s valuation to continue re-rating higher,” he said.

The analyst’s other selections for investors are:

* Celestica Inc. (CLS-N, CLS-T) with an “outperform” rating and US$450 target. Average: US$461.15.

Mr. Treiber: “Risk-reward appears attractive, given valuation pullback and likely another beat and raise quarter. The recent selloff in AI stocks has created a buying opportunity in Celestica’s shares in our view. We expect the company to deliver Q3 revenue at the high end of guidance and raise FY26 revenue guidance, which we believe will be catalysts for the stock. Q3 is likely to benefit from the continued ramp of next-generation hyperscaler AI compute programs, the commencement of mass production for 1.6T switch programs, and a return to double-digit ATS growth on recovering capital equipment demand.”

* Constellation Software Inc. (CSU-T) with an “outperform” rating and $4,400 target. Average: $3,838.22.

Mr. Treiber: “Organic growth expected to bounce back. Even though Q3 capital deployed on acquisitions in our M&A tracker is below our model, we believe Q3 results may be a catalyst for Constellation’s shares. First, we expect organic growth to rebound back to Constellation’s 10-year average. Second, year-to-date capital deployed (including Q4-to-date) remains healthy. Third, Constellation’s shares remain at discounted valuation levels.”

* Kinaxis Inc. (KXS-T) with an “outperform” rating and $210 target. Average: $205.

Mr. Treiber: “Another FY26 guidance raise appears likely, given solid new bookings momentum. We expect Kinaxis’s shares to rally following Q3 results. We believe SaaS and ARR growth are likely to remain solid, given likely continued strong bookings and new customer wins, amidst a healthy demand environment. Additionally, we believe Kinaxis may modestly raise FY26 guidance for a second consecutive quarter. With the stock effectively near historical valuation lows, we see attractive risk- reward.”

In a client report titled Gas Gripes Grinding Till Summer, Ventum Financial Markets analyst Adam Gill initiated coverage on three new names in the Canadian gas space, seeing a “near-term bullish setup, followed by [a] better outlook in spring/summer.”

“At this juncture, we are not bullish on gas prices, and believe that they will remain depressed in the near term given expectations for a warm 2026/2027 winter due to a ‘Super’ El Niño event,” he said. “With the weather outlook challenged based on the current forecast, we believe heating demand could fall 2.7 Bcf/d (approximately 7 per cent) relative to historical norms. This will result in high storage levels coming out of the heating season, with our current forecast at 2.2 Tcf at the end of winter (20 per cent higher than the 5-year average), with expected continued near-term pressure on natural gas prices if this plays out. Shifting to spring/summer next year, we see a better balance given solid demand from electrical generation and expanding LNG export capacity, which will be able to absorb the expected growth in supply. We see a similar setup to 2023/2024, where gas prices weakened at the start of winter after a ramp-up in the fall, then recovered and continued to climb over the summer after dealing with the weakened demand of a warm winter.

“That said, we believe next year’s summer setup is solid, and if producers react to weak prices, it could accelerate the improvement in the supply/demand balance into the summer (something to watch for as Q3/26 results and 2027 capital budget plans start rolling out in the coming weeks). As usual, a bit more patience is needed on the gas story, but demand is building critical mass with massive LNG export expansion next year which makes a material impact in 2028, and we believe tactical investors can strike when the timing is right.”

The new stocks in Mr. Gill’s coverage universe are:

* Advantage Energy Ltd. (AAV-T) with a “buy” rating and $13.50 target. The average is $13.63.

Analyst: " Advantage has taken steps to substantially improve its leverage position with the Wembley disposition and is in a position to get active on the NCIB program. With a solid FCF yield of 8.6 per cent, even on weak strip gas prices and one of the sector’s lowest EV/DACF [enterprise value to debt-adjusted cash flow] valuations, we see this stock primed to re-rate."

* Birchcliff Energy Ltd. (BIR-T) with a “neutral” rating and $8 target. Average: $8.05.

Analyst: “Birchcliff is a 20-year, single-play Montney/Doig producer that owns the majority of its infrastructure and sells its gas physically into premium markets rather than hedging, providing ample torque to a gas price improvement.”

* Peyto Exploration & Development Corp. (PEY-T) with a “buy” rating and $31 target. Average: $27.50.

Analyst: “Given the potential for storage to end the winter at elevated levels, we believe investors should stick with higher-quality names that have higher margins and cash returns to shareholders. With that view, we like Peyto, which has the strongest margins in the sector and a 5.7-per-cent dividend yield, so you can get paid while you wait.”

Premium Brands Holdings Corp. (PBH-T) is “regaining investor confidence through steady execution,” according to National Bank Financial analyst Vishal Shreedhar.

For the Vancouver-based company’s third quarter, he’s projected earnings before interest, taxes, depreciation and amortization (EBITDA) of $225-million, which is in line with the Street ($224-million) and up from $175-million during the same period a year ago. He attributes that 28-per-cent gain to “organic sales growth, acquisition contribution (19-per-cent contribution to growth), and margin expansion in both Specialty Foods (SF) and Premium Food Distribution (PFD).”

Ahead of the release of its results on Oct. 29, Mr. Shreedhar warned timing of contracts is likely to visibly weigh on the performance of its Specialty Foods segment.

“NBCCM models SF OVGR [organic volume growth rare to decelerate to 3.9 per cent from 6.0 per er cent in Q2/26, largely reflecting: (i) a shifting of a major QSR LTO [quick-service restaurant limited-time offer] to 2027 (from H2/26; sandwich promotion by a customer within Custom Culinary solutions), (ii) the closure of a beef plant in Ontario, (iii) phased approach to a contract (from an all-in approach), and (iv) a large launch now expected in October (from late Q2/early Q3), etc.,” he said. “NBCCM models flattish gross margin year-over-year in SF, largely reflecting lower contribution from acquisitions and divestitures (approximately 50 basis points), offset by production efficiency/scaling, slight benefits from commodities, and pricing. Despite favourable input cost inflation in the quarter, we do not expect PBH to benefit meaningfully in Q3/26 largely due to a lag in the pass-through.

“We are constructive on management’s plan to monetize non-core assets, in addition to plans to divest four plants over the next 12 months (one beef plant already divested in Ontario in Q2/26).”

Maintaining his “sector perform” rating for Premium Brands shares, Mr. Shreedhar reduced his target to $93 from $98 to reflect “increasing macroeconomic uncertainty.”

“Over the medium term, we believe PBH’s outlook will be supported by organic growth and EBITDA margin expansion (to 10.1 per cent in 2027E from 9.0 per cent in 2025). That said, we look for more consistent execution,” he concluded.

RBC Dominion Securities analyst Bart Dziarski has a “favourable” view of Fairfax Financial Holdings Ltd.’s (FRFHF, FFH-T) US$5.6-billion acquisition of a 60.72-per-cent stake in IDBI Bank from the government of India, projecting it could generate an internal rate of return of 13 per cent with “potential upside to high-teens.”

“The $5.6-billion IDBI deal provides FFH with access to India’s fast-growing economy via the nation’s 6th largest private bank,” he said. “As part of the deal, Digit, IIFL Capital, and IDBI will be combined to create a unified financial services company spanning banking, insurance, investment banking and wealth management. While we acknowledge there are many moving pieces to the deal, we have included IDBI in our model assuming Q1/27 close and estimate 7-per-cent EPS accretion in 2027.

“We estimate FFH could generate 13-per-cent IRR on the deal: FFH is paying INR 81/share for 60.72 per cent of IDBI, or 1.2 times P/B. We model an attractive 13-per-cent IRR over a 15-year holding period, assuming IDBI sustains its 14-per-cent ROE, which ranks second highest among Indian bank peers, and slightly below IDBI’s 15-per-cent target. We see upside to high-teens IRR if IDBI valuation re-rates higher or excess capital is deployed over time (we note IDBI currently has a 27-per-cent CET1 ratio vs. peer average at 18 per cent).”

In a client report released Friday, Mr. Dziarski said he views the deal “positively,” but he emphasized “a few offsets.”

“Our overall favourable view of the transaction includes partial offsets: i) FFH buybacks are likely to slow going forward and we have trimmed our buyback estimates in 2027 & 2028 from 100k shares/q to 50k shares/q; ii) we estimate FFH earnings mix will shift from 25-per-cent contribution from profits from associates and non-insurance entities to 30 per cent but we don’t view this shift as concerning; and iii) FFH becomes incrementally more complex and, in our view, complexity ultimately prevents FFH from re-rating to a valuation multiple implied by a P/B ROE regression on P&C peers (which we estimate at 1.7 times) but we already account for this in our target multiple, which is set at 1.4 times,” he said.

Keeping his “outperform” rating for Fairfax Financial, the analyst raised his target to US$2,318 from US$2,223. The average is $2029.36.

“We increase our 2027 & 2028 estimates to reflect the added contribution from IDBI which drives our price target higher, which is derived by applying a 1.4 times P/B target multiple to our Q3/27E BVPS. Despite the recent move higher in the shares, with FFH up 15 per cent in October, FFH continues to trade at an attractive forward 1.1-times P/B multiple and we maintain FFH as our top value pick,” he concluded.

In other analyst actions:

* TD Cowen’s Tim James raised his target for FirstService Corp. (FSV-Q, FSV-T) to US$203 from US$195 with a “buy” rating following an inline third-quarter report, believing the “resiliency and growth” in the results supports an “investment opportunity.” The average target is US$178.

“Q3 demonstrated predictability and provided outlook for improving year-over-year comps across most business lines for Q4 and into 2027. We expect past share price pressure on Roofing and M&A concerns as gradually reverting to historical market appreciation for the business model and relatively low risk investment characteristics. No change to bullish investment thesis,” said Mr. James.

* Ahead of Lassonde Industries Inc.’s (LAS.A-T) third-quarter results on Nov. 5, National Bank’s Ahmed Abdullah raised his target to $264 from $257, keeping a “sector perform” rating, expecting “softer” sales but “lower concentrate and better pricing.” The average is $278.

“We raised 3Q Adj. EBITDA by 6 per cent to $87.6-million (was $82.6-million, consensus estimate $87.5-million) and Adj. EPS to $5.91 (was $5.35, CE $5.97), reflecting persistent benefits from lower concentrate costs and a slower pricing giveback than previously assumed,” he said. “Revs remain at $717.8-million (CE $729.4-million), with earnings now broadly in line with consensus.”

* After a third-quarter beat as its “organic growth shows strength”, National Bank Financial analyst Cameron Doerksen raised his target for shares of Mullen Group Ltd. (MTL-T) to $36 from $31 with an “outperform” rating. Other changes include: Desjardins Securities’ Benoit Poirier to $34 from $31 with a “buy” rating, TD Cowen’s Tim James to $36 from $32 with a “buy” rating and RBC’s Walter Spracklin to $35 from $32 with an “outperform” rating. The average is $30.33.

“Our positive view is based on: (1) as evidenced by Mullen’s solid organic revenue growth in Q3, we see the broader trucking market conditions continuing to improve due to regulatory/enforcement changes that have stabilized pricing and improved demand; (2) we see Mullen as well-positioned to capitalize on new business related to the advancement of “nation-building” (pipelines and mining activity notably) and other infrastructure projects in Western Canada (such as data centre build-outs); and, (3) with a strong balance sheet, the company is well positioned for further M&A growth," said Mr. Doerksen.

* Roth Capital’s Nick Pope raised his target on Ovintiv Inc. (OVV-N, OVV-T) to US$65 from US$55, keeping a “neutral” rating ahead of a third-quarter financial results in which he’s not expecting any surprises. The average is US$76.40.

* Dedjardins Securities’ Lorne Kalmar cut his StorageVault Canada Inc. (SVI-T) target to $5.25 from $6 with a “buy” rating. The average is $5.80.

“The broader macro volatility finally took a toll on operations as SVI reported its first year-over-year occupancy decline in a year and a half and SPNOI [same-property net operating income] moderated to 3 per cent. While our long-term outlook is unchanged, management expects organic growth to remain in the 4-per-cent range for 2027. This tempered near-term outlook drove the majority of the downward revisions to our estimates. However, our revised forecast still calls for a 10-per-cent FFOPS CAGR [funds from operations per share compound annual growth rate] (2026–28), which we do not believe is appropriately reflected in SVI’s current valuation,” said Mr. Kalmar.

* National Bank’s Ahmed Abdullah increased his Winpak Ltd. (WPK-T) target to $52 from $50 with a “sector perform” rating following in-line third-quarter results. The average is $49.

“The quarter backs WPK’s recent commentary around converting its commercial pipeline wins into recurring business. Guidance points to 4Q volume growth similar to 3Q and modest sequential gross margin improvement as waste declines, although execution remains key,” said Mr. Abdullah.