Inside the Market’s roundup of some of today’s key analyst actions
Stifel analyst Stephen Soock sees “significant” value in i-80 Gold Corp.’s (IAU-T) asset base, however he warns “the high cost of capital and long timelines make it difficult to translate into current value for the stock.”
Accordingly, following the release of the Nevada-based company’s new go-forward plan and third-quarter financial report, he moved his recommendation to “speculative buy” from “buy” previously.
“We have updated our expected construction timelines in line with the company’s guidance - largely delaying expected cash flows,” said Mr. Soock in a note released Tuesday. “We have removed the Ruby Hill base metals floatation as the company is no longer pursuing this opportunity. We have also removed refurbishment of the Lone Tree Autoclave for $340-million, but have raised our assumed processing costs for refractor material by 20 per cent to account for third party processing fees. We now see Granite Creek Underground (currently operating) only hitting our modeled 350tpd [tons per day] run rate late next year after upgrading the de-watering system for the underground. We model McCoy Cove coming online in mid-2029 (vs mid-2027 previously) with permitting timelines more protracted than we previously thought. We have added in the Granite Creek Oxide Open Pit Heap Leach project into our DCF, with production starting in late 2029 (previously in-situ value at $25/oz or $32-million total).”
Pointing to its current rate of cash burn, the analyst now projects i-80 will need to raise $100-million in Q1 and projects an additional convertible debenture.
“We also model the company needing to raise a bare minimum of an additional $50-million before the end of the year to pay back the $58-million in convertible debt due in December 2025,” he said. “Management is currently working on negotiating with Sprott and Orion to re-finance or push out the due date for these instruments. We model i-80 raising $200-million in equity at $1.25/sh in Q4 2025, which would give them runway through to February 2027 to execute on developing the underground into the SPZ at Granite Creek and de-watering and early works at Cove. Lastly, we assume the company issues $250-million in debt in 2027 to be able to repay the $65-million in convertible debentures due in February 2027 and fund construction of the Granite Creek Open Pit Heap Leach mine.”
Adjusting his cash flow projects to reflect the new project timelines for i-80 “with projects largely pushed out to the right,” Mr. Soock cut his net asset value projection by 30 per cent, leading him to reduce his target for its shares to $2 from $4. The average on the Street is $2.57, according to LSEG data.
“Management plans to take a methodical, step-by-step approach to developing the projects but require significant outside funding to fix IAU’s balance sheet and fund construction of the project pipeline. We believe the market will ascribe more value to the company’s asset base as technical reports are issued to clarify the path forward,” he said.
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While he thinks a trio of tuck-in acquisitions announced Monday for US$66-million will “ultimately prove to be beneficial” for Premium Brands Holdings Corp. (PBH-T), National Bank Financial analyst Vishal Shreehar would have preferred it “demonstrate traction with its existing organic growth initiatives prior to engaging in M&A.”
Shares of the Vancouver-based specialty foods company slid 0.8 per cent after the premarket unveiling of the deals for NSP Quality Meats (with plants located in Oklahoma, Texas and Missouri), Casa Di Bertacchi (New Jersey) and Italia Salami (Ontario). It also completed the sale and leaseback of its recently expanded Hempler’s deli meats production facility in Washington for gross proceeds of approximately US$68-million.
“The acquired businesses have a combined annual sales of US$200-million,” said Mr. Shreedhar. “We anticipate these transactions will be moderately accretive to 2025 EPS; we will update our estimates as more information becomes available. Recall last quarter, PBH indicated four M&A opportunities ($331-million sales) were at advanced stages; this suggests one potential advanced stage opportunity remains.”
“Recall Specialty Foods (SF) growth is expected to be primarily driven by U.S. initiatives. The acquisitions of NSP Quality Meats and Casa Di Bertacchi are expected to improve access to additional U.S. markets and increase capacity for U.S. cooked protein initiatives. The Italia Salami acquisition is smaller, but is expected to support the Concord business (cooked protein; additional local production to support the Marcangelo brand).”
The analyst maintained his investing view on Premium Brands, reiterating a “sector perform” rating and $99 target. The average target on the Street is $102.40.
“Over the medium term, we believe PBH’s outlook will be supported by solid organic growth and EBITDA margin expansion (NBF models 9.5 per cent in 2025 from 8.9 per cent in 2023),” he said. “PBH indicated last quarter that its acquisitions are expected to be neutral to slightly helpful to its balance sheet. We model 2025 leverage of 2.8 times senior debt to EBITDA (target is 2.5-3.0 times; Q3/24 is 3.4 times) and 3.3 times total debt to EBITDA (target is 3.5-4.0 times; Q3/24 is 4.4 times).”
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Wedbush analyst Dan Ives expects U.S. tech stocks to be rise 25 per cent in 2025 “as the Street further digests a less regulatory spider web under Trump in the White House with Khan/FTC days in the rear-view mirror, stronger AI initiatives within the Beltway on the way, and a goldilocks foundation for Big Tech and Tesla looking into 2025 and beyond.”
“We believe tech stocks will be robust in 2025 on the shoulders of the AI Revolution and $2 trillion-plus of incremental AI cap-ex over the next 3 years,” he added. “While there will be some white knuckle moments in 2025 along the way on the heels of Fed worries, China tariff poker game, and stretched valuation chorus moments ... this will create the opportunities to own the tech theme and key names which has been our core investing tech playbook the last 2 years.”
In a research note released late Monday, Mr. Ives emphasized “software now invited to the AI Party as use cases explode.”
“Now the time has come for the broader software space to get in on the AI Party as we believe the use cases are exploding, enterprise consumption phase is ahead of us beginning in 2025, launch of LLM [large language] models across the board, and the true adoption of generative AI will be a major catalyst for the software sector and key players to benefit from this once in a generation 4th Industrial Revolution set to benefit the tech space. The AI Software era is now here in our view,” he said.
“We believe the two best software plays on the AI Revolution into 2025 remain Palantir and Salesforce ... with many well positioned software vendors joining the AI Party (still 10 p.m. that goes till 4 a.m.). Nvidia and Cloud Stalwarts remain the AI driving force. The start of this $2-trillion+ of AI spending all began with the Godfather of AI Jensen and Nvidia as they remain the only game in town with their chips the new gold and oil. The stalwart cloud/ hyper scale players in 2025 will continue to play an instrumental role in this key phase of the AI Revolution being led by Microsoft and now also seeing Google (GCP) and Amazon (AWS) both finding major cloud and AI momentum into the coming years.”
The analyst revealed his “Top 10 Tech Winners for the AI Revolution in 2025.” They are:
- Nvidia Corp. (NVDA-Q) with an “outperform” rating and US$175 target. The average on the Street is US$170.34.
- Microsoft Corp. (MSFT-Q) with an “outperform” rating and US$550 target. Average: US$501.17.
- Palantir Technologies Inc. (PLTR-Q) with an “outperform” rating and US$75 target (Street high). Average: US$44.40.
- Tesla Inc. (TSLA-Q) with an “outperform” rating and US$515 target (Street high). Average: US$278.47.
- Alphabet Inc. (GOOGL-Q) with an “outperform” rating and US$210 target. Average: US$208.32.
- Apple Inc. (AAPL-Q) with an “outperform” rating and US$325 target (Street high). Average: US$243.85.
- MongoDB Inc. (MDB-Q) with an “outperform” rating and US$360 target. Average: US$377.12.
- Pegasystems Inc. (PEGA-Q) with an “outperform” rating and US$100 target. Average: US$100.67.
- Snowflake Inc. (SNOW-N) with an “outperform” rating and US$190 target. Average: US$192.43.
- Salesforce Inc. (CRM-N) with an “outperform” rating and US$425 target. Average: US$401.20.