Tariff turmoil and fears of recession have rattled financial markets and put pressure on many companies. But some have thrived in this challenging environment, and Morningstar analysts have raised their fair value estimates of those names.
A fair value estimate is a Morningstar analyst’s estimate of a stock’s intrinsic value, determined using a proprietary discounted cash flow model. Key drivers behind material changes to an estimate might include improved fundamentals, stronger revenue forecasts, enhanced financial performance, better long-term prospects, and increased optimism around profitability. These estimates let investors compare opportunities across industries and around the globe on an apples-to-apples basis.
More than simply marking price adjustments, fair value estimate revisions recognize sustained operational discipline. Often overlooked amid louder market upheavals, these recalibrations offer investors greater clarity—a sign that beneath any surface volatility is a more resilient business.
The following names from Morningstar’s Canadian coverage stand out for having recently earned increases to their fair value estimates.
Air Canada
- Fair Value Estimate: C$17.50
- Price/Fair Value: 1.06
- Economic Moat: None
- Capital Allocation Rating: Standard
- Morningstar Rating: ★★★
Canada’s leading airline may have yet to fully recover from the pandemic hit to travel demand, but it continues to show steady progress. With 2025 capacity forecast to reach 106 million passenger miles, it’s nearly back at its prepandemic level of 113 million.
“This continues the company’s recent trajectory of a more gradual, disciplined postpandemic expansion compared with some of its competitors,” says Morningstar equity analyst Nicolas Owens, who recently upped the stock’s fair value estimate to C$17.50 per share from C$17.20.
“The company’s gradual growth trajectory is partly involuntary, limited by delayed aircraft deliveries, but also reflects its disciplined approach in a competitive environment where oversupply in some of its markets have curtailed near term growth plans,” he notes.
Explore detailed analyst commentary on Air Canada.
Telus
- Fair Value Estimate: C$30.00
- Price/Fair Value: 0.72
- Economic Moat: Narrow
- Capital Allocation Rating: Standard
- Morningstar Rating: ★★★★★
One of Canada’s three biggest wireless operators, Telus recently posted solid first-quarter results. Revenue improved 3% yearly, while consolidated EBITDA grew 6% as the firm added a sizable number of subscribers across its wireless and wireline networks.
“Telus continues to drive impressive telecom results amid a challenging Canadian landscape, which is experiencing slowing immigration and increased competition,” says Morningstar equity analyst Samuel Siampaus. He recently raised the stock’s fair value to C$30 per share from C$29, prompted by improved near-term revenue outlook and “better-than-expected Telus Health revenue and healthy telecom activity amid a competitive landscape.”
While noncore businesses may not necessarily enhance Telus’ competitive positioning, “at a time of intense competition, we appreciate the diversification effects and the runway for growth and margin improvement they provide,” Siampaus says.
Explore detailed analyst commentary on Telus.
Canadian Tire
- Fair Value Estimate: C$165.00
- Price/Fair Value: 0.97
- Economic Moat: None
- Capital Allocation Rating: Standard
- Morningstar Rating: ★★★
Leading retailer Canadian Tire boasts over 1,400 affiliated locations across the country, selling a wide assortment of goods spanning automotive parts, home furnishings, appliances, and home improvement items under its iconic banner. Recent acquisitions of various sporting goods and apparel chains have further bolstered its footprint.
Canadian Tire recently posted first-quarter revenue growth of 4%, driven by a 4.7% jump in comparable sales. Adjusted EBITDA also soared 11% to C$422 million (12.2% margin), due to favorable cost leverage in the retail segment.
“Mid-single-digit revenue growth is a welcoming sign, given Canadian Tire’s top line has been consistently pressured for two years due to economic uncertainty and overstocked inventory levels at its dealer partners,” says Morningstar equity analyst Noah Rohr.
Prompted by the firm’s recent earnings results exceeding expectations, Rohr says he plans to raise the stock’s C$165 per share fair value estimate by a low- to mid-single-digit percentage, and he forecasts fiscal 2025 comparable sales to be about 3% (up from 2%) “to account for the strong top-line performance.” He further assures that the retailer’s exposure to tariffs is minimal, with just 15% of its cost of goods stemming from US merchandise. “However, the firm could be indirectly affected if tariff uncertainty drives a deterioration in consumer confidence,” he warns.
Explore detailed analyst commentary on Canadian Tire.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.
