This TSX stock rebounds from ‘excessive’ negative sentiment as analyst prices in 22% upside

A cyclist rides past Rogers Communications Inc. signage on Toronto's Bloor Street. Photo by Peter J. Thompson/National Post files

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Why analysts see upside to Enbridge stock, what Rosenberg Research sees as a post-Iran-war winner and more from The Week in Stocks. 

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Stock of the week: Rogers Communications Inc.

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Shares of Rogers Communications Inc. (RCI/B:TSX) have been on a rollercoaster over the past few weeks falling 15 per cent as investors bailed from the stock, spooked by a telecom wireless price war, only for the shares to regain some lost ground on earnings that matched estimates. In the wake of all that, TD Cowen analyst Vince Valentini hiked his price target for Rogers post-earnings to $60 from $56 and upgraded his rating to a buy from a hold, calling the negative sentiment around the stock “excessive” and adding in a note on Wednesday that “we believe that the market continues to underestimate both the value of the company’s sports assets and the potential timing of their monetization. Shares closed Friday at $49.26. Valentini expects a deal to go ahead to buy a 25 per cent stake of Maple Leaf Sports and Entertainment (MLSE) from Kilmer Sports Inc., though he said the transaction could take place later than expected. On the wireless front, the TD analyst said the telcos have received the message that the price wars were “destructive and unacceptable.” The analyst highlighted four catalysts for the Rogers shares, including ongoing debt reduction to bring levels to those of peers, more savings from the purchase of Shaw Communications Inc., further “non-core” asset sales and more information on monetizing MLSE. Desjardins Capital Markets analyst Jerome Dubreuil also hiked his price target to $59 from $54.50, citing as a “clear positive” the significant reduction in capital spending. However, Desjardins thought markets would react more positively than they did to the spending cuts, he said. Rogers’ 12-month target price, based on the calls of 17 analysts, is $59.25, according to Bloomberg.

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Keeping score

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Rosenberg Research on what may be a big winner after the Iran war

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“Alternative energy will be a big winner of the U.S.-Israel-Iran war,” David Rosenberg, president of Rosenberg Research and Associates Inc., said in note, adding that the backlash against the clean-energy sector is starting to unwind as the conflict reconfirms energy security as a top global priority. “Investors should continue to manage geopolitical risk at the portfolio level, rather than trading too quickly,” Rosenberg said. Investing opportunities in the renewables space go beyond energy generation to include batteries, grid modernization and energy storage, while commodities linked to alternative energy run from copper, uranium, lithium and nickel to rare earths. Here is a list of exchange-traded funds (ETFs) Rosenberg is suggesting investors can tap to get into the sector: iShares Energy Storage and Materials ETF (IBAT), iShares Global Clean Energy ETF (ICLN), Global X Copper Miners ETF (COPX), Evolve Global Materials and Mining Enhanced Yield ETF (BASE), Global X Copper Producer Equity Covered Call ETF (CPCC), VanEck Rare Earth and Strategic Metals ETF (REMX) and Global X Uranium ETF (URA). Since the start of the war, the ICLN ETF is up nearly 10 per cent. “For investors, renewable energy will increasingly be both a source of diversified return and a hedge in portfolio construction,” Rosenberg said.

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Enbridge upside seen on U.S. permits, natural gas infrastructure development

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Shares of Enbridge Inc. (ENB:TSX) got a boost on Friday when the federal government announced it had approved the $4 billion expansion of the company’s Westcoast pipeline system, adding “up to 300 million cubic feet per day of additional transportation capacity on B.C.’s major natural gas transmission system. Construction is slated to begin this summer, subject to addressing environmental, safety and Indigenous engagement concerns. Shares of Enbridge have slumped through April, but are up 10 per cent year to date and rose slightly on the news, closing Friday at $72.86. The 12-month consensus price target on the shares based on 23 analysts is $76.15, a level they hit late last month. Some analysts see more upside, though their calls don’t relate to the announced expansion. UBS Research analyst Manav Gupta has a price target of $85 on the shares, due to permits recently approved by the United States that Gupta said are critical to Enbridge’s Main Line Optimization plan. Enbridge’s Main Line moves crude oil from western Canada into the U.S. Veritas Investment Research analyst Darryl McCoubrey has a price target of $82 “largely due to favourable market conditions for North American natural gas infrastructure development,” he said in a note on Friday.