Citi analyst puts ‘upside 90-day catalyst watch' on this U.S. megacap stock
Daily roundup of research and analysis from The Globe and Mail's market strategist Scott Barlow
BMO senior economist Sal Guatieri is predicting a contraction in the domestic economy but the news isn't all bad,
'Don't count the Canadian economy out just yet. It surprised to the upside in the first quarter, expanding at an annualized rate of 2.2%—marking the fifth consecutive quarter of above-potential growth. However, this strength largely reflected businesses and exporters rushing to beat tariffs, effectively borrowing activity from future quarters. Meanwhile, consumer spending slowed and residential construction plunged, as trade-related fears sapped confidence. Despite lower mortgage rates, existing home sales fell for a fifth straight month in April, though preliminary May data from several cities suggest the market may be stabilizing … Despite stronger Q1 results and a modest gain in preliminary April GDP, the economy appears poised for a mild contraction in the near term … Still, the outlook has brightened somewhat. The average effective tariff rate on Canadian shipments to the U.S. is around 6%—lower than the 10% baseline rate for most countries and well below China's levy … Progress in the trade war and some firmer data led us to raise our 2025 real GDP forecast modestly to 1.3% (or 0.5% on a Q4/Q4 basis)'.
***
Citi analyst Tyler Radke slapped an 'upside 90-day catalyst watch' on Microsoft Corp.,
'We open a positive catalyst watch on MSFT (MSFT-Q) with our view that Street Azure estimates are too low for FY26. This is supported by exit rate math and capex ROI analysis which supports Azure growth in the mid-to-high 30s% and recent read-throughs and positive checks. We believe the catalyst will be F'4Q25 earnings when FY26 guidance is announced and beyond as both Microsoft and OpenAI AI revenue continues to ramp'
Mr. Radke has a US$605 target on the stock, almost 30 per cent higher than current levels.
***
In a separate BMO report, senior economist Shelly Kaushik quantified the sharp drop in cross border traffic,
'It looks like Canadian travellers continued to avoid U.S. travel in May. According to preliminary data from StatCan, 1.3 mln Canadians returned to the country via the land border in May—that's down almost 40% from a year ago. In the first five months of the year, Canadian road trips to the U.S. are down almost 30% from the same period in 2024. There are a few factors at play here. Perhaps most obviously, relations between the two countries have been at their rockiest in recent memory and have likely driven a preference for domestic travel on both sides of the border (note the U.S. domestic visitors by land were down 8% y/y in May). Plus, the weather was unseasonably cold in many parts of the continent. And, the early-year weakness in the Canadian dollar has also played a role—a quick shopping trip didn't hit the same way when the loonie was above $1.40. While some of these factors should normalize in the months to come, the real question is how quickly relations between the two countries will stabilize… and how soon people will decide it's worth visiting their neighbours once again'
***
Bluesky post of the day: https://bsky.app/profile/alphaville.ft.com/post/3lrcwqjjpac2e
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