Alimentation Couche-Tard stock rating upgraded by CFRA after 7-Eleven bid withdrawal

Investing.com - CFRA upgraded Alimentation Couche-Tard Inc (TSE:ATD) (OTC:ANCUF) from Sell to Hold and raised its price target to C$81.00 from C$62.00 following the company’s withdrawal of its offer to acquire Seven & i Holdings Co.

The convenience store operator ended its pursuit of the 7-Eleven owner, citing a lack of engagement from the Japanese company, according to CFRA. The deal faced significant challenges, including unproductive negotiations, potential regulatory scrutiny, and apparent reluctance from the Japanese government to allow foreign ownership of the iconic retail chain.

CFRA expects Alimentation Couche-Tard to return to its established acquisition strategy, noting that over 70% of the company’s current store network came through mergers and acquisitions. The firm believes the mature and fragmented U.S. convenience store sector remains ripe for consolidation.

The company maintains strong financial capacity for future deals with a 2.0x leverage ratio for fiscal year 2025, $2.3 billion in cash, and an additional $3.4 billion available under its revolving credit facility.

With the 7-Eleven pursuit now abandoned, Alimentation Couche-Tard can restart its share buyback program, which had been paused during the acquisition attempt.

In other recent news, Alimentation Couche-Tard has withdrawn its proposal to acquire 7&i Holdings, a move that would have significantly expanded its business. This decision follows the company’s earlier indication of setting a timeline to finalize the transaction. The withdrawal allows Couche-Tard to resume its share repurchase program before its blackout period begins, as the company’s leverage ratio provides room for additional buybacks. Raymond (NSE:RYMD) James has reiterated its Strong Buy rating on the stock, maintaining a price target of C$80, despite the challenges the acquisition could have posed, including potential divestiture of stores.

Meanwhile, BMO Capital has adjusted its price target for Alimentation Couche-Tard to C$76 from C$82, while keeping an Outperform rating. The adjustment is due to higher-than-expected growth in SG&A and D&A expenses, which surpass gross profit growth, and slower same-store sales in certain product categories. However, BMO Capital noted some positive trends, such as better-than-expected same-store sales in U.S. merchandise for the first quarter of fiscal 2026. The firm also mentioned the potential for a resolution with Seven in the future, while keeping the company lower in its investment preferences.

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