CIBC Capital Markets maintained its neutral rating on the shares of Pet Valu Holdings (PET.TO) and lowered its price target to C$22.00 from $28.00 after the company reported its first quarter-financial results on Tuesday.
The bank said the core issue is "macro as opposed to execution, though PET's price/promo positioning remains a headwind." CIBC reduced its earnings forecasts in line with management's updated outlook and now forecasts 10% growth in 2027.
"Though we believe valuation reflects substantial pessimism, we do not see a visible catalyst to push shares higher in the near-term (outside of a privatization)," said analyst Mark Petrie. "While there are understandable explanations for the pressures, we believe it will take PET some time to re-build investor confidence in medium-term growth potential."
The bank also reduced its target multiple on the company to 13x, taking its price target to C$22.00.
"We have never been of the view that PET was a particularly strong fit with a strategic acquirer (such as CTC or EMP), but given the share price and compressed valuation, it could be an attractive target for a financial sponsor that could cut costs and push it into a franchise," added Petrie.
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