On Friday, April 4, 2025, BMO Capital Markets made significant adjustments to its outlook on several Canadian companies, including Dollarama Inc. and Metro Inc. The firm raised the price target for Dollarama to Cdn$170.00 from the previous target of Cdn$160.00 while maintaining an Outperform rating on the stock. This revision comes amid observations of softening trends in the first quarter of fiscal year 2026, which BMO attributes to diminishing consumer confidence influenced by growing tariff discussions and policies.
Analyst Tamy Chen noted that while the early quarter trends indicate a slowdown, the revised estimates still align with the midpoint of Dollarama’s forecasted financials for 2026. Despite the adjustment of Dollarcity projections, which are part of Dollarama’s business, BMO continues to support the Outperform rating and has raised the target price to Cdn$170. Chen’s analysis points out that Dollarama’s valuation remains high, trading at approximately 22 times the firm’s revised estimates for 2026 EBITDA, compared to its historical average of 16 to 18 times.
This elevated valuation suggests that there could be near-term volatility in Dollarama’s stock price if the current trend of weakening consumer spending persists. Nevertheless, looking beyond the immediate future, BMO Capital Markets holds a positive long-term view on Dollarama. Chen stated, "Medium term, we still see DOL as a high-quality growth story." This sentiment reflects confidence in the company’s potential to continue expanding and generating returns for shareholders despite the current economic headwinds and market challenges.
In a similar vein, on Monday, April 1, 2025, BMO Capital Markets also showed confidence in Metro Inc., increasing the price target to Cdn$110.00, up from the previous Cdn$96.00, while reiterating an Outperform rating on the stock. Chen anticipates an uptick in earnings per share (EPS) growth for the company’s second fiscal quarter of 2025, which ended in mid-March, projecting a year-over-year increase of 11%. Metro Inc., a Canadian food and pharmacy leader, is set to report its FQ2/25 earnings on April 16, 2025.
Chen’s optimistic forecast is based on an expected quarter-over-quarter acceleration in food inflation and same-store sales (SSS) growth in the pharmacy’s front-of-store operations. The report from BMO Capital suggests that despite the uncertainties presented by the current economic environment, investors are maintaining their interest in staple names within the Canadian market, including grocers like Metro Inc.
The analyst’s revised price target reflects a belief in the company’s continued performance amidst these conditions. Chen’s commentary highlights the funds flow, indicating that investors remain committed to several staple stocks, including Canadian grocers, during uncertain times. The positive outlook for Metro Inc. is also supported by the company’s potential to sustain EPS growth, which is a key factor for investors.
Metro Inc. is navigating an economic landscape marked by escalating tariff discussions, which could potentially affect consumer spending patterns. However, the raised price target from BMO Capital Markets signals a positive view of the company’s ability to adapt and grow, even as market conditions evolve.
Additionally, on the same day, securities analysts revised their ratings and price targets on several other Canadian companies. CIBC notably cut Bank of Montreal's target price to Cdn$141 from Cdn$152 and downgraded its rating to neutral from outperformer. Conversely, Scotiabank raised Dollarama Inc.'s target price to Cdn$175 from Cdn$150, while RBC raised its target price to Cdn$183 from Cdn$159.
Other notable changes included CIBC cutting National Bank of Canada to underperformer from neutral and raising RBC's rating to outperformer from neutral. National Bank of Canada also upgraded TFI International to outperform from sector perform, reflecting confidence in the company's potential amidst the current economic climate.
In a broader context, these adjustments reflect a cautious yet optimistic outlook among analysts regarding Canadian companies' abilities to navigate the ongoing economic challenges. The revisions suggest that while some firms may face headwinds due to changing consumer behaviors and tariff discussions, others are well-positioned to thrive.
Investors are advised to consider these ratings and price targets as they navigate the Canadian market, particularly in sectors such as retail and essential goods, which continue to attract attention even in uncertain times. As financial analysts continue to monitor these trends, the overall sentiment appears to lean towards a cautious optimism, with many believing that the Canadian economy has the resilience to adapt and grow.
In conclusion, as the economic landscape evolves, companies like Dollarama and Metro Inc. are not only adjusting to current conditions but are also poised for potential growth. Investors will be watching closely as these firms report their earnings and navigate the challenges presented by the ongoing tariff discussions and consumer confidence issues.
