On Monday, RBC Capital maintained its Outperform rating on Alimentation Couche-Tard Inc (ATD/B:CN) (OTC: ANCUF), with a price target of Cdn$96.00. Alimentation Couche-Tard, known for its global chain of convenience stores, has made headlines with its confidential and preliminary proposal to acquire Seven & i Holdings, a move that aligns with the company's ambitious growth strategy.
Despite the potential acquisition stirring interest, RBC Capital notes that investors are likely to adopt a cautious stance until more details emerge.
Alimentation Couche-Tard's bid to acquire the owner of the 7-Eleven convenience store chain is described as a bold initiative that could position it as the world's largest convenience store operator.
The analyst firm points out that the muted response of Couche-Tard's share price to the news reflects a mix of investor support for the company's strategic moves and the prevailing uncertainty regarding the specifics of the potential deal.
The announcement of the acquisition proposal comes alongside news that Alimentation Couche-Tard will purchase GetGo Cafe + Markets from Giant Eagle.
This acquisition includes 270 convenience retail and fuel locations in several U.S. states, expanding Couche-Tard's presence in the region. GetGo's operations feature a variety of made-to-order food options, with both open-concept and stand-alone kiosks.
The strategy of pursuing both smaller-scale and significant acquisitions simultaneously is not new to Alimentation Couche-Tard, as the company has a history of such dual approaches to expansion. This latest move is seen as a continuation of that pattern, demonstrating Couche-Tard's commitment to growth through strategic mergers and acquisitions.
RBC Capital's reaffirmation of the Outperform rating and the Cdn$96.00 price target comes amidst a period of potential transformation for Alimentation Couche-Tard, as it explores opportunities to solidify its position as a leader in the convenience store sector.
The firm's analysis suggests a watchful but optimistic outlook for Couche-Tard's stock as the market awaits further details on the proposed acquisitions.
Alimentation Couche-Tard reported its fiscal fourth-quarter operating results, with an adjusted EBITDA of $1.14 billion and earnings per share (EPS) of $0.48, slightly below the consensus estimate of $0.50. The company also reported a 12% decrease in its third-quarter fiscal year 2024 adjusted EPS of $0.65, missing analysts' projected EPS of $0.84.
Canaccord Genuity adjusted its price target for the company, decreasing it to C$85.00 from the previous C$87.00 but maintained its Buy rating. RBC Capital also maintained its Outperform rating on the company, despite a slight downward adjustment in forecasts for fiscal years 2025 and 2026.
Stifel Canada reiterated a Buy rating, acknowledging the successful progression of the company's integration efforts and the positive customer response to the rebranding of several stores to the Circle K banner.
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