Despite Innergex’s past misfires in Chile, CIBC World Markets’ Mark Jarvi believes the market should give the Longueuil-based company the benefit of the doubt to purchase three new-build wind farms for $861.2 million. (Photo: Getty Images)
What to do with Boralex, Innergex and Bombardier stocks? Here are some analyst recommendations that prices are likely to move in the near future. Note: The author may have a completely different opinion from the one expressed.
Boralex (BLX, $42.69): The green energy producer has been gaining a little too fast
Even before the June 13 stock market crash took Boralex into the abyss, IA Capital Markets’ Naji Baydoun felt the green power producer had already given a lot in the stock market, both in terms of appreciation and valuation.
Still a 28% gain compared to the rise of just 5% of its peers in the stock market and the 5% decline of the S&P/TSX index since early 2022.
On the morning of June 13, the analyst withdrew his buy recommendation because the increase in the value of the share – which is mainly due to the “20% increase in the valuation multiple” – reduced the possible total return to just 2.8% including dividends, based on price target of $45.
The company’s growth in 2022 has helped the stock, but the consensus forecast for operating income is up just 4% year-to-date, he said.
As a result, he sees Boralex’s stock valuation “upgraded” at 13.1 times expected operating profit and 26 times expected free cash flow. That’s 20% higher than the benchmark group and nearly an all-time high for the company.
“To date, Boralex has executed well on several initiatives that have created value and exceeded our expectations and those of investors,” he adds. He cites the good price on the sale of a minority stake in a wind farm in France, the partnership in Quebec to develop wind projects with a potential capacity of 1.2 GW and finally the receipt of solar contracts in upstate New York that support his growth strategy in the United states.
The AI analyst still likes the company’s growth profile, but its stock largely reflects its recent accomplishments and prospects. “The title deserves to be traded in more expensively than the competition, but its comparative rating is unlikely to increase its lead as much in the future,” he judges.
In the end, the risk-return ratio is less attractive than before. “Cash provides him with an opportunity to make other strategic acquisitions that could be a catalyst in the near term, but we do not include those opportunities in our estimates.”
He now recommends keeping the title.
Innergex (INE, $17.89): The addition of three Chilean wind farms brings desirable critical mass