Major Analyst Upgrades and Downgrades You Can't Afford to Miss!

In an important update for investors, today's analysis highlights key changes among Canadian banks and various corporations as experts adjust their evaluations based on anticipated economic trends.

Canadian Banks Set for a 2026 Bounce Back

RBC Dominion Securities' analyst Darko Mihelic shared his view that 2025 will be a 'transitional year' for Canadian banks, with a more promising 'normal earnings power' emerging in 2026. Mr. Mihelic emphasizes that stabilizing economic conditions, reduced fears over mortgage payment shocks, and peaking credit losses are set to improve the bank's earnings performance next year.

"We roll our bank valuations forward to our 2026 estimates," he stated, forecasting improved net interest income growth and more aggressive share buybacks. He suspects the current EPS estimates for 2026 may be conservative, suggesting there’s room for upward surprises.

Mr. Mihelic upgraded both Bank of Montreal (BMO) and Canadian Imperial Bank of Commerce (CIBC) to “outperform” status. He hiked BMO’s share price target from $133 to $161, presenting significant upside potential, and increased CIBC's target from $97 to $103. The overarching sentiment is that both banks convincingly navigate their previous credit concerns.

Mixed Signals for Alimentation Couche-Tard

National Bank Financial's Vishal Shreehar raised Alimentation Couche-Tard's stock rating from 'sector perform' to 'outperform,' citing expectations of improved growth fueled by favorable year-over-year comparisons. Their aggressive $10 billion EBITDA growth strategy aims for fiscal 2028 and is largely driven by organic growth, though potential M&A activity looms over the company's future.

Despite these optimistic recommendations, concerns arise regarding the firm's recent customer reception in North America compared to Europe and Asia, raising questions about its capacity to seize organic growth opportunities moving forward.

Loblaw's Upward Momentum Hits the Brakes

After a solid performance, Scotia Capital's John Zamparo downgraded Loblaw Companies Ltd. from 'sector outperform' to 'sector perform,' reflecting cautious sentiment amid stock price surges—an 8% increase since October compared to the slower growth of George Weston Ltd. His recommendation turns conservative, favoring a strategic switch towards WN for potentially higher returns.

George Weston Ltd. and the Strategic Shift

Zamparo also upgraded George Weston Ltd. to 'sector outperform' from 'sector perform,' interested in its attractive discount to net asset value. He adjusted its target from $218 to $240, anticipating shifts that could positively affect investor outcomes amidst grocery market fluctuations.

Cargo Transportation Sector Sees Opportunities

In the cargo transportation realm, TD Cowen analyst Tim James identified Mullen Group Ltd. as a top pick, recommending it based on its low valuation and strong growth prospects. He foresees significant revenue increases for Mullen in the coming years, as enhanced market conditions favor logistics companies.

Telus and Regulatory Hopes

Moving to telecommunications, Scotia Capital analyst Mager Yaghi speculates that a potential Conservative-led federal government might unwind foreign ownership restrictions, positioning Telus Corp. as a prime beneficiary. His target for Telus was slightly cut to $22.50 in a more cautious environment, as expectations for growth in 2025 are moderated by competitive pressures in the sector.

Celestica Poised for Success

RBC's Paul Treiber spotlighted Celestica Inc., predicting a robust growth trajectory as it capitalizes on rising hyperscaler capital expenditures. He raised the company’s target to US$115, driven by expectations that it will exceed market forecasts in the fiscal year.

Power Sector Dynamics

For TransAlta Corp., CIBC World Markets' Mark Jarvi downgraded his outlook from 'outperform' to 'neutral.' He cites an extended rally lifting stock prices beyond fair value, advising shareholders to approach cautiously in a rapidly transforming energy market.

As 2025 approaches, the financial landscape for Canadian equities presents cautious optimism. Investors are advised to keep a close eye on how these dynamics unfold, as fresh opportunities arise amid evolving economic conditions. Stay tuned for further updates as these companies navigate their potential!