The Globe and Mail reports in its Tuesday, Jan. 17, edition that Canaccord Genuity analyst Aravinda Galappatthige, seeing Corus Entertainment's risk profile "heightened" in near the term, lowered his rating to "hold" from "speculative buy." The Globe's David Leeder writes in the Eye On Equities column that Mr. Galappatthige issued his downgrade because of "uncertainty around ad trends, balance sheet, and dividend." Lowering his revenue and earnings estimates through the end of fiscal 2023, Mr. Galappatthige cut his share target by 60 cents to $2. Analysts on average target the Class B shares at $2.88. Mr. Galappatthige says in a note: "We are keeping our eyes on leverage which is now heading toward 3.5 times net debt/LTM EBITDA by Q3/23, against a bank covenant of 4.25 times. As such, much depends on ad trends and changes to outlook over the next two months. With the incremental downward adjustments to our estimates, our target falls largely due to the exaggerated impact of the leverage. We continue to use four times EV/EBITDA 2024 to value the stock and do not see a compelling case at this point to raise the target multiple." He says Corus's rising risk profile offsets its "upside scenarios."
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