Friday, September 10, 2021 - BEFORE THE OPEN
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Friday, September 10, 2021
STOCKS
Source: FactSet (5pm EDT)
BEFORE THE OPEN
Source: Thomson Reuters
Futures for Canada's main stock index were up, tracking higher oil prices, as
investors awaited the country’s employment data to gauge the pace of economic
recovery. Wall Street futures rose, mirroring global shares, as news of a call
between Joe Biden and Xi Jinping offered some relief to investors expecting
cautious central bank steps towards ending stimulus. Japan’s Topix index
touched its best level since 1990 on hopes of a new government and further
improvement in earnings. The dollar index was little changed, while gold prices COMMODITIES & CURRENCIES
Source: FactSet (5pm EDT)
edged lower.
STOCKS IN THE NEWS
Source: Thomson Reuters
Alphabet Inc (GOOG):
Indian conglomerate Reliance Industries delayed the launch of a low-cost
smartphone it is developing with Google to November, citing an industry-wide
semiconductor shortage. "Both the companies have begun testing JioPhone
Next with a limited set of users for further refinement and are actively working
to make it available more widely in time for the Diwali festive season," Jio said
in an exchange filing late on Thursday.
Amgen Inc. (AMGN):
Lung cancer patients in England will become the first in Europe to receive a drug GLOBAL INDICES
Source: FactSet (5pm EDT)
made by the U.S. biotech company that targets a specific gene mutation, the
country's health service said. NHS England said it was fast-tracking lung cancer
drug sotorasib after it was shown in clinical trials to stop lung cancer progression
for seven months.
DoorDash Inc. (DASH) & Uber Technologies Inc. (UBER):
DoorDash, Uber Eats and Grubhub have sued New York City over legislation to
license food-delivery apps and to permanently cap commissions they can charge
restaurants. The companies are seeking an injunction that would prevent New TSX SECTORS
Source: FactSet (5pm EDT)
York from enforcing the fee-cap ordinance adopted last month, as well as
unspecified monetary damages and a jury trial. "Those permanent price controls
will harm not only Plaintiffs, but also the revitalization of the very local
restaurants that the City claims to serve," the companies said in the lawsuit filed
on Thursday.
THINGS TO KNOW
Source: Bloomberg Finance L.P.
President Joe Biden spoke to China’s Xi Jinping in their first call since February as
American frustration builds over what Washington sees as Beijing’s lack of
serious engagement over a range of matters. Strategists at Deutsche Bank AG
are joining the chorus of investment banks urging caution on U.S. stocks. With
fears over the withdrawal of stimulus easing, signs of a slowdown in China’s tech
crackdown and the possibility of improved Washington-Beijing relations,
investors are dipping a toe back into the risk pool.
NOT FOR DISTRIBUTION TO THE UNITED STATES. This publication is a general market commentary and is provided for informational purposes only. The author(s) is not a Research Analyst and this
communication is not the product of Canaccord Genuity Corp.’s Research Department. It should not be construed as a research report or investment advice.
For important information, please see the Important Disclosures beginning on page 10 of this document.
CANADIAN EQUITIES OF INTEREST
Listed Alphabetically by Symbol
Dollarama* (DOL: $55.69), Net Change: -$1.81, Change: -3.15%
First Look: A softer-than-expected quarter due to COVID-19 related headwinds
• Dollarama reported softer-than-expected Q2/F22 earnings results yesterday morning, as revenue of $1,029 million was up
1.6% YoY
• EBITDA of $294 million was ahead of last year at $278 million but modestly below the consensus estimate of $296 million,
and adjusted EPS of $0.48 was below consensus of $0.50
• The company opened 13 net new stores during the quarter and was active with its NCIB, repurchasing 2.9 million shares at
an average price of $56.71 per share during the quarter
• The company expects to open 60-70 net new stores in F2022 with capital expenditure of $160-170 million
Descartes Systems Group* (DSG: $105.24), Net Change: $1.33, Change: 1.28%
No signs of slowdown given global logistics complexity
• A broad-based tailwind across multiple elements of Descartes’ business is being driven by strong volumes and pricing
environment amongst logistics customers, growth in ecommerce/last mile and extreme supply chain challenges and material
shortages faced by businesses dependent upon logistics services
• Descartes is now seeing an unusually strong demand environment for technology and information services which is creating
an acceleration of organic growth (roughly 15-16% YoY in Q2) and margin expansion
• A strong pricing environment for shipping providers given capacity constraints, port congestion and raw material shortages
is supporting a higher prioritization on technology investments
• EBITDA growth of 35% YoY was impressive, coming in ahead of management's guide of 10-15% as a stronger top line and
operating leverage came into play
Tantalus Systems Holding Inc.* (GRID: $2.20), Net Change: $0.16, Change: 7.84%
Digitizing the electric grid
• For over thirty years, Tantalus has delivered mission-critical advanced metering infrastructure (AMI) solutions to public power
and electric cooperative utilities across North America and its solutions are increasingly in demand as utilities digitize the grid
• The company boasts a steady growth profile, nearly 100% customer retention, and rising margins as its unique software and
data analytics offering account for an increasingly greater proportion of revenue
• Tantalus has grown its revenue at an 8% CAGR between 2013 and 2020 with significant room for additional growth and has
grown the public power and electric cooperative utilities in its user community from ~50 utilities in 2014 to ~200 utilities
• Capital allocation priorities include investments in sales and marketing and research and development initiatives to deliver
next-generation solutions that digitize the distribution grid
US EQUITIES OF INTEREST
Listed Alphabetically by Symbol
AeroVironment* (AVAV: $92.00), Net Change: -$13.50, Change: -12.80%
Q1/22 results stronger than anticipated
• AeroVironment (AVAV) reported Q1/22 revenues of $101M (up 16% y/y) and adj. EPS of ($0.17), as well as record-high funded
backlog of $258M in Q1/22, which was up 67% y/y
• The strong backlog reflected underlying organic growth in addition to acquired backlog from the company’s recent spate of
M&A activity
• This backlog is expected to translate into revenue over the next three quarters, which management highlighted as a key factor
in maintaining its existing top-line guidance of ~$570M
• Irrespective of the Afghanistan withdrawal, management remains confident in its position on the Army’s FTUAS program
• Management indicated that it has been in conversations with the US Navy and other government agencies about
incorporating the Switchblade 600 and Blackwing into a larger portion of manned and unmanned combat vessels
Friday, September 10, 2021
Unless otherwise noted, the above commentary is derived from research published by Canaccord Genuity Corp and/or Canaccord Genuity LLC. For more information, please contact your investment
advisor. For current disclosures, please visit our Online Disclosure Database at http://disclosures.canaccordgenuity.com/EN/Pages/default.aspx.
2Lovesac Company* (LOVE: $62.62), Net Change: $12.16, Change: 24.10%
Revenue growth and profitability momentum persist
• Lovesac reported strong 2Q22 results, with 65% y/y total revenue growth and a 12% adj. EBITDA margin both coming in well
ahead of expectations
• Industry tailwinds, increasing brand awareness, and the ongoing expansion and diversification of the company’s customer
touchpoints are all contributing to heightened demand and improving conversion despite reduced promotional activity
• Management expects 3Q22 revenue growth of ~50% y/y and an adj. EBITDA loss of $3-4M, as Lovesac anticipates a ~530bps
y/y gross margin contraction due to supply chain headwinds, expense reinstatements, and infrastructure investments
Rocket Lab USA.* (RKLB: $20.72), Net Change: $5.63, Change: 37.31%
To infinity and beyond
• Rocket Lab is a high-growth launch operator and small satellite manufacturer that is ~90% vertically integrated and is the
second most prolific commercial launch operator next to SpaceX with 18 successful launches to-date
• Key customers for Rocket Lab’s launch services include NASA, the National Reconnaissance Office (NRO), BlackSky, Planet and
Capella Space
• The company’s Electron rocket is currently aimed toward serving the small satellite launch market, which saw launch volumes
expand by 209% in 2020
• Recently, Rocket Lab has developed a smallsat bus called “Photon” as part of its end-to-end launch/satellite offering to
prospective customers
Friday, September 10, 2021
Unless otherwise noted, the above commentary is derived from research published by Canaccord Genuity Corp and/or Canaccord Genuity LLC. For more information, please contact your investment
advisor. For current disclosures, please visit our Online Disclosure Database at http://disclosures.canaccordgenuity.com/EN/Pages/default.aspx.
3INDUSTRY UPDATE
Oil
Market – Reuters
• WTI (October) is up 1.6% to $69.23 and Brent (November) is up 1.6% to $72.57. WTI is higher after finishing down 1.7% on
Thursday, though on pace for a slight decline for the week
• Some of yesterday's declines were pinned on the announcement that China would release some of its strategic crude reserves
to ease pressure on rising raw material prices
• Loading operations in two Libyan ports resumed after this week's stoppage, but the slow return of Gulf of Mexico output
continued, with 1.39M bpd, or 75.5%, of output still offline, according to BSSE data Thursday
China – Bloomberg
• China's National Food and Strategic Reserves Administration announced that it tapped its giant oil reserves to ease the
pressure of rising raw materials prices
• The agency also said that it was putting the oil on the market through open auctions to better stabilize domestic supply and
demand
• China's crude inventories have hit around 220M barrels after building up over the past decade, while analysts said that China
released 20-30M barrels over the summer, and expect further releases in the 10-15M barrel range
OPEC+ – Platts
• Iraq's production was up 1.9% m/m in August to 3.961M bpd, though below its quota of 4.061M bpd, but Iraq had better
compliance in the past few months as its quota has risen after struggling for most of the previous year to adhere to its output
OPEC+ caps
Global markets – Platts
• Oman's energy and minerals minister, Mohammed al-Rumhy, said yesterday that global oil prices could rise to $200 a barrel
if no new investments are made in the oil and gas sector in the short term
• The comments were a response to the IEA's report that outlined the path to global zero-emission energy by 2050 which would
require no new oil and gas developments and global oil demand collapsing by 75%
Source: FactSet
Friday, September 10, 2021
Unless otherwise noted, the above commentary is derived from research published by Canaccord Genuity Corp and/or Canaccord Genuity LLC. For more information, please contact your investment
advisor. For current disclosures, please visit our Online Disclosure Database at http://disclosures.canaccordgenuity.com/EN/Pages/default.aspx.
4MORNING INK REPORT
Bright Minds debuts with a mostly sunny outlook
Source: INK Research
As of: Thursday, September 9, 2021
Company Highlight: Bright Minds (DRUG)
• The stock started on the CSE on February 8th of this year, and shortly thereafter it completed a prospectus offering of
3,419,883 units at $7.57 per unit for gross proceeds of about $25.9 million
• Units consisted of one share and a half warrant with each full warrant exercisable at $9.46 for three years, and according to
the company's website, Bright Minds has just over 17 million shares outstanding on a fully diluted basis
• Bright Minds is focused on developing targeted therapies for the treatment of mental health and neurological disorders
through the use of serotonergic compounds
• The stock initially tumbled last March in the wake of rising bond yields which dragged down the entire Healthcare sector,
where at that point, CEO Ian McDonald started buying
• Although the stock remains off its all-time high of $9.15, the CEO is making money on his public market purchases.
• From March 17 to May 14, Bright Minds (DRUG) CEO Ian McDonald bought 50,600 shares at an average price of $6.16, and
he currently holds 895,400 shares, representing 7.57% of all shares outstanding (not fully diluted)
• Bright Minds Biosciences has above median ownership (direct & indirect holdings) by Officers and Directors compared to
other small-cap stocks in the Healthcare sector according to SEDI filings as of September 7, 2021
Bright Minds Chart (DRUG)
Source: INK Research
Friday, September 10, 2021
Unless otherwise noted, the above commentary is derived from research published by Canaccord Genuity Corp and/or Canaccord Genuity LLC. For more information, please contact your investment
advisor. For current disclosures, please visit our Online Disclosure Database at http://disclosures.canaccordgenuity.com/EN/Pages/default.aspx.
5MARKET MOVERS
Source: FactSet
Friday, September 10, 2021
Unless otherwise noted, the above commentary is derived from research published by Canaccord Genuity Corp and/or Canaccord Genuity LLC. For more information, please contact your investment
advisor. For current disclosures, please visit our Online Disclosure Database at http://disclosures.canaccordgenuity.com/EN/Pages/default.aspx.
6ASSET CLASS PERFORMANCE
Source: FactSet
*All numbers presented on the table below are based on total return
Friday, September 10, 2021
Unless otherwise noted, the above commentary is derived from research published by Canaccord Genuity Corp and/or Canaccord Genuity LLC. For more information, please contact your investment
advisor. For current disclosures, please visit our Online Disclosure Database at http://disclosures.canaccordgenuity.com/EN/Pages/default.aspx.
7MACRO-EVENT SCHEDULE
Source: Bloomberg Finance L.P.
EARNINGS
Source: Yahoo Finance
CANADA
Company Ticker Exchange Period Time Est.EPS
North West Company Inc. NWC TSX Q3 2021 BO 0.72
Dollarama Inc. DOL TSX Q3 2021 - 0.49
Enghouse Systems Ltd. ENGH TSX Q3 2021 AC 0.39
Tecsys Inc. TCS TSX Q3 2021 AC 0.07
USA
Company Ticker Exchange Period Time Est.EPS
Academy Sports and Outdoors Inc. ASO NASDAQ Q3 2021 AC 1.42
American Outdoor Brands Inc. AOUT NASDAQ Q3 2021 AC 0.40
Dave & Buster's Entertainment Inc. PLAY NASDAQ Q3 2921 AC 0.58
Farmer Bros Co. FARM NASDAQ Q2 2021 AC -0.44
Lovesac Co. LOVE NASDAQ Q3 2021 BO -0.08
Zscaler Inc. ZS NASDAQ Q3 2021 AC 0.09
Zumiez Inc. ZUMZ NASDAQ Q3 2021 AC 0.78
Friday, September 10, 2021
Unless otherwise noted, the above commentary is derived from research published by Canaccord Genuity Corp and/or Canaccord Genuity LLC. For more information, please contact your investment
advisor. For current disclosures, please visit our Online Disclosure Database at http://disclosures.canaccordgenuity.com/EN/Pages/default.aspx.
8MOST READ NEWS
Source: Bloomberg Finance L.P.
1)Biden Calls Xi Over U.S. Frustration With Dead-End Talks
2)U.S. Futures, Stocks Rise as Tapering Worries Ease: Markets Wrap
3)Generation 9/11: Following Parents They Lost Onto Wall Street
4)BofA’s Subramanian Likens S&P 500 to 36-Year, Zero-Coupon Bond
5)SocGen, Natixis Use Under-Desk Sensors as Office Return Ramps Up
6)Deutsche Team Sees Risk of ‘Hard’ Equity Valuation Correction
7)Fed’s Kaplan, Rosengren to Sell All Stocks Amid Ethics Concerns
8)Harvard’s $42 Billion Fund to Stop Investing in Fossil Fuels
9)A Momentous Shift Is Taking Shape in Pay Trends: John Authers
10)Goldman Says Market Is Complacent About Upcoming Risk Events
THE LAST DROP: “The greatest glory in living lies not in never falling, but in rising every time we fall.”
- Nelson Mandela
Friday, September 10, 2021
Unless otherwise noted, the above commentary is derived from research published by Canaccord Genuity Corp and/or Canaccord Genuity LLC. For more information, please contact your investment
advisor. For current disclosures, please visit our Online Disclosure Database at http://disclosures.canaccordgenuity.com/EN/Pages/default.aspx.
9Appendix: Important Disclosures
While this product is drawn from sources believed to be reliable, the accuracy and completeness of the information contained herein is not guaranteed. Any reference
to a research report or a recommendation is not a solicitation to purchase or sell any security and it does not consider the individual investment objectives, financial
situation, suitability or risk tolerance of any person or corporation. Accordingly, investors should obtain advice based on their own specific circumstances before making
any investment decision. Canaccord Genuity Wealth Management is a division of Canaccord Genuity Corp. Member – Canadian Investor Protection Fund (CIPF) and the
Investment Industry Regulatory Organization of Canada (IIROC).
Quest®: Canaccord Genuity’s proprietary online valuation and analytical tool which combines consensus market figures with the Quest® Discounted Cash Flow (DCF)
Valuation Model.
Quest® triAngle is Canaccord Genuity’s proprietary 15-factor, stock-picking tool, which systematically measures Value, Quality and Momentum and presents the results
in a simple, easy to understand score. It takes a multi-pronged approach to Value, Quality and Momentum using five factors for each component, which adds more
consistency of performance unlike a reliance on one single measure. It uses a mix of historic and forecast data, and combines absolute valuation data with comparisons
relative to history. The triAngle is designed to generate stock ideas and provide a consistent framework for analysis of portfolio holdings.
Quest® Methodology
Quest® is an analytical tool that involves use of a set of proprietary quantitative algorithms and value calculations to derive a number of corporate performance and
valuation metrics, including assigning a Default Quest® value per share and generating a triAngle Score, which is a relative ranking based on a number of operational
and valuation metrics. These algorithms and value calculations are consistently applied to all the companies included in the Quest® database. Third-party data (including
consensus earnings estimates) are systematically translated into a number of default variables and incorporated into the algorithms. The source financial statement,
pricing, and earnings data provided by outside data vendors are subject to quality control and may also be adjusted to more closely measure the underlying economics
of firm performance. These adjustments provide consistency when analyzing a single company across time, or analyzing multiple companies across industries or national
borders. As the third-party data are updated, the triAngle Score generated by Quest®, and the Default Quest® value per share may change. The default variables may
also be adjusted by the user to produce alternative values, any of which could occur. Additional information about the Quest® methodology is available on request.
Canaccord Genuity Quest® Disclosures
Quest® is at this stage registered in the UK and in the USA, and common law trade mark rights are asserted in other jurisdictions. Quest® is non-independent research
and is a marketing communication under the FCA Conduct of Business rules. All rights reserved. Quest®, CITN®, Companies in the News™, CFROC®, and triAngle™ are
all trademarks of Canaccord Genuity Limited. E&OE. © Canaccord Genuity Limited. For important information and company-specific Quest® disclosures please see
Important Disclosures at the following website (provided as a hyperlink if this report is being read electronically): https://disclosuresquest.canaccordgenuity.com/.
Please note that analyst data and Quest® data may differ due to different sources and calculation methods. The Quest® platform may be found at the following website
www.canaccordquest.com
* Canaccord Genuity and its affiliated companies may have a Corporate Finance or other relationship with the company and may trade in any of the Designated
Investments mentioned herein either for their own account or the accounts of their customers, in good faith and in the normal course of market making. The authors
have not received, and will not receive, compensation that is directly based upon or linked to one or more specific Corporate Finance activities, or to coverage contained
in the Morning Coffee.
Canaccord Genuity is the global capital markets group of Canaccord Genuity Group Inc. (CF : TSX)
The recommendations and opinions expressed in this research report accurately reflect the Investment Analyst’s personal, independent and objective views about any
and all the Designated Investments and Relevant Issuers discussed herein.
Canaccord Genuity (Australia) Limited is the Australian affiliate of global capital markets group Canaccord Genuity Group Inc. (CF : TSX). The recommendations and
opinions expressed in this research report accurately reflect the Analyst’s personal, independent and objective views about any and all the designated investments and
relevant issuers discussed herein.
Friday, September 10, 2021
Unless otherwise noted, the above commentary is derived from research published by Canaccord Genuity Corp and/or Canaccord Genuity LLC. For more information, please contact your investment
advisor. For current disclosures, please visit our Online Disclosure Database at http://disclosures.canaccordgenuity.com/EN/Pages/default.aspx.
10You can also read
