Globe & Mail 09:50 AM EST, 03/02/2021 (MT Newswires) -- Cargojet Inc. (CJT.TO) was upgraded to Sector Outperform from Sector Perform at Scotiabank on Tuesday, a day after declining 8% when the company's fourth quarter results beat consensus estimates.
Shares of the Canadian airline fell approximately 2% on Tuesday morning in Toronto Stock Exchange trading.
Scotiabank analyst Konark Gupta, who maintained a $220 price target on Cargojet, said the stock has been losing momentum for a while and has declined about 30% since its November 2020 peak.
"We believe a combination of factors could be behind this weakness, including Air Canada's decision to enter the dedicated cargo market, risk to long-term cash flow outlook due to planned $400 million-plus multi-year growth capex with high revenue visibility, recent pressure on growth/momentum stocks, and tough growth comps this year (from Q2)," Gupta said in a note to clients.
"In our view, risk/reward has improved to a point where upside risk outweighs downside risk in the medium term while long-term outlook is strong," the analyst said.
"We expect contract news (wins and/or extensions) to be a potential catalyst as EBITDA & FCF likely decline this year, while the key risk to our thesis could be a significant impact from Air Canada," he said.
ATB analyst Chris Murray lowered his price target on Cargojet to $225 from $275, and maintained an Outperform rating.
"We see the quarter as in-line however believe that higher interest rates will weigh on companies with premium valuations," Murray said in a note to clients.
"We continue to expect solid growth from the company over the coming years as e-commerce demand is sustained and new aircraft are added and see today's sell-off as offering an attractive entry point."
(MT Newswires covers equity, commodity and economic research from major banks and research firms in North America, Asia and Europe. Research providers may contact us here: https://www.mtnewswires.com/contact-us)
Price: 172.76, Change: -2.69, Percent Change: -1.53