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Stifel initiated coverage on Cargojet Inc. (TSX:CJT) (OTC:CGGJF) with a buy rating and a price target of C$125.00, citing the company’s near-monopoly position in Canada’s air cargo market.
The Canadian air freight operator controls approximately 90% of its domestic market, creating what Stifel describes as "a unique infrastructure-like asset with very strong barriers to entry." These barriers include foreign ownership restrictions, cabotage laws prohibiting foreign carriers from operating between domestic ports, and high capital expenditure requirements.
Cargojet’s growth prospects are supported by e-commerce trends, with Canada lagging behind other developed nations in adoption rates while delivery speed becomes increasingly important for online purchases. The company maintains above-average revenue visibility through long-term contracts and strategic partnerships with major players including DHL and Amazon (NASDAQ:AMZN).
The freight carrier has demonstrated impressive historical growth with 10-year revenue and EBITDA compound annual growth rates of approximately 18% and 26%, respectively. Stifel also highlighted Cargojet’s solid balance sheet with 2.5x leverage, modest dividend yield, and active normal course issuer bid program.
Despite trading at a 10-year low valuation of 6.6x 2026 estimated EBITDA compared to its historical average of 10.0x, Stifel noted the company still offers only about a 6% free cash flow yield. The firm views Cargojet’s scarcity value as potentially significant in a takeout scenario.
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