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On Friday, BMO Capital Markets adjusted its outlook on EQB Inc (EQB:CN) (OTC:EQGPF), lowering the price target to Cdn$115.00 from the previous Cdn$119.00, while maintaining an Outperform rating on the stock. The revision comes in light of the company facing prolonged elevated credit provisioning and an increase in impaired loans across its lending segments.
Analysts at BMO Capital noted that EQB is bracing for a tougher housing market in the second half of 2025, as mentioned in their recent statement "EQB prepared for a more challenging housing market in H2/25". Management expressed during a call that achieving double-digit loan growth is expected to be a challenge over the next 6 to 12 months, prompting a more cautious outlook.
The price target adjustment is based on a reduction in earnings forecasts for EQB. Despite the challenges, BMO Capital believes that EQB’s stock offers a greater margin of safety, trading slightly above book value, which is currently lower than its long-term average of 1.2 times. The firm’s target price is derived from 9 times adjusted earnings, representing approximately a 25% discount when compared to its peers, and 1.3 times book value.
EQB’s situation reflects broader concerns in the housing market and the potential impact on lenders. The company’s preparedness for the anticipated market conditions and the valuation reflecting a margin of safety could be key points of interest for investors monitoring the financial sector.
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