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Scotiabank has reiterated its Sector Outperform rating for Colliers International (NASDAQ: CIGI), maintaining a $155.00 price target.
The firm's analysis acknowledges that while Colliers' share price has increased by 37% since July 24, it has underperformed compared to Scotiabank's internal benchmark by 9 percentage points year-to-date.
Despite the limited near-term upside to the price target, the firm remains attentive to a more optimistic scenario for the company.
On Friday, Colliers International announced a reclassification of its operating segments into Real Estate Services, Investment Management, and Engineering. This new segmentation has been positively received by Scotiabank, prompting an adjustment in their Sum-of-the-Parts valuation method. The firm believes that the market is becoming increasingly optimistic about the potential for a recovery in real estate transaction volumes.
Scotiabank's commentary suggests that if Colliers' Capital Markets revenue returns to its 2021 peak of $1.2 billion by 2026, as opposed to the $0.7 billion forecast for 2024, there could be an additional $85 million in EBITDA.
This represents a roughly 13% increase from the total EBITDA, potentially raising the target valuation to $190.00. This outlook assumes normalized organic growth for Colliers' other segments.
The reassessment of Colliers' financials and the positive reaction to the new operating segment classification appear to be key factors in Scotiabank's continued confidence in the stock. While the immediate price target remains at $155.00, the analysis indicates potential for significant growth under favorable market conditions.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Colliers International's financial position and market performance. The company's market capitalization stands at $7.4 billion, reflecting its significant presence in the Real Estate Management & Development industry. Colliers' P/E ratio of 50 and adjusted P/E ratio of 53.01 for the last twelve months as of Q2 2024 indicate that the stock is trading at a high earnings multiple, aligning with Scotiabank's observation of the company's recent share price increase.
InvestingPro Tips highlight that Colliers is trading near its 52-week high, with a strong return of 53.41% over the last year. This performance supports Scotiabank's analysis of the stock's recent outperformance. Additionally, the company's revenue for the last twelve months as of Q2 2024 was $4.43 billion, with a modest growth of 1.32%, suggesting stable operations despite market fluctuations.
Investors should note that while Colliers operates with a moderate level of debt, it has demonstrated profitability over the last twelve months. This financial stability, combined with analysts' expectations of net income growth this year, may contribute to the positive outlook mentioned in Scotiabank's report.
For those seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for Colliers International, providing deeper insights into the company's financial health and market position.
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