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Investing.com - Raymond (NSE:RYMD) James has reiterated its Strong Buy rating and C$80.00 price target on Alimentation Couche-Tard Inc (TSE:ATD) (OTC:ANCUF) following the company’s withdrawal of its proposal to acquire 7&i Holdings.
The withdrawal comes after Couche-Tard had indicated during its June 26 earnings call that it was setting a timeline to determine if a transaction with 7&i could be reached. The potential acquisition would have been transformational for Couche-Tard, more than doubling the size of the business.
Couche-Tard’s stock has underperformed since the proposal announcement on August 19, 2024, declining 16% compared to Casey’s General (NASDAQ:CASY) Stores’ 35% gain and the S&P 500’s 12% rise during the same period. The uncertainty surrounding the offer and pause in share buybacks contributed to this performance.
With the proposal withdrawn, Couche-Tard can resume its share repurchase program, which the company likely aims to have in place before its blackout period begins on August 3. The company’s current leverage ratio stands at approximately 1.96x versus its target of 2.25x, providing room for additional buybacks.
Raymond James noted that Federal Trade Commission hurdles would have been challenging for the deal, potentially requiring divestiture of around 2,000 stores, and indicated that 7&i was "likely never a willing seller" while Couche-Tard "did not want to go hostile."
In other recent news, Alimentation Couche-Tard Inc has seen its price target lowered by BMO Capital to C$76 from C$82. This adjustment comes while BMO Capital maintains an Outperform rating on the company’s stock. The firm pointed to higher-than-expected growth in selling, general, and administrative expenses, as well as depreciation and amortization, which currently outpace gross profit growth. Additionally, BMO Capital noted slower-than-expected same-store sales in Other Tobacco Products and U.S. food categories as influencing factors. Despite these challenges, the firm observed some positive developments, such as first-quarter fiscal 2026 U.S. merchandise same-store sales performing modestly better than fourth-quarter fiscal 2025 averages. BMO Capital also alluded to the potential for a resolution with Seven in the coming months. The firm maintained its target multiple of 11 times fiscal 2026 estimated EBITDA for Alimentation Couche-Tard. However, it indicated that the convenience store chain remains low in its hierarchy of preferred investments.
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