BMO lifts Canadian Tire stock rating, raises target to C$170

On Thursday, BMO Capital Markets revised its stance on Canadian Tire Corporation Limited (CTC/A:CN) (OTC: CDNAF), elevating the company’s stock rating from Market Perform to Outperform. The firm also increased the price target for Canadian Tire shares from C$155.00 to C$170.00.

The upgrade was prompted by a combination of factors, including Canadian Tire’s recent share price performance, strategic financial moves, and the sale of its Helly Hansen brand. BMO’s analysts believe these elements contribute to a favorable risk/reward scenario for the retailer’s stock.

According to BMO Capital, the new price target of C$170.00 is derived from a sum-of-the-parts valuation method, coupled with a 5.2 times multiple of the firm’s revised 2025 estimated Retail EBITDA. This multiple remains consistent with historical norms, which have ranged between 4.5 and 6 times.

The analysts highlighted Canadian Tire’s proactive efforts to improve its balance sheet by reducing leverage through 2024. This financial strategy is seen as a positive step towards strengthening the company’s overall financial health.

In their commentary, BMO analysts stated, "Upgrading CTC to Outperform from Market. Target (NYSE:TGT) price raised to $170 (from $155), based on a combination of our sum-of-the-parts approach and 5.2x (unchanged) our revised 2025E Retail EBITDA (historical range 4.5-6x). In summary, the combination of CTC’s recent share price decline, balance sheet deleveraging through 2024 and sale of Helly Hansen lead us to view an asymmetrical risk/reward set-up with more potential upside than downside for the stock."

The upgrade and new price target reflect BMO Capital’s confidence in Canadian Tire’s ability to navigate its current challenges and capitalize on potential growth opportunities. Investors and market observers will be watching closely to see how Canadian Tire’s stock performance aligns with BMO’s positive outlook.

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