On Friday, BMO Capital Markets adjusted its stance on Canfor Corp . (TSX:CFP:CN) (OTC: CFPZF), shifting the rating from Outperform to Market Perform, while maintaining a price target of C$20.00. This change in rating comes as the firm anticipates that Canfor's lumber segment will face significant challenges in the upcoming years.
The challenges mentioned are primarily due to an expected increase in export lumber duties, which are likely to rise to 35-40%. This rate is above the industry average and presents a headwind for Canfor's performance. The analyst from BMO Capital Markets noted that despite Canfor's stock trading below book value, which generally suggests that valuation is not a concern, the forecast for the lumber market has led to a more cautious view on the company's short-term prospects.
The analyst's comments indicate that while the valuation of Canfor Corp. does not pose a problem, the operational outlook is less optimistic. The significant increase in export duties is expected to impact Canfor's lumber operations negatively, leading to the decision to downgrade the stock to Market Perform.
Despite the downgrade, BMO Capital Markets has not altered its price target for Canfor, which remains at C$20.00. This suggests that while the firm expects Canfor to face hurdles, the current price target still reflects the analyst's view of the company's value.
The unchanged price target amidst the downgrade indicates that BMO Capital Markets believes Canfor is appropriately valued at C$20.00, even as it braces for a more challenging lumber market environment in the near future.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.