Alimentation Couche-Tard Inc, the Consumer Cyclical sector company, was revisited by a Wall Street analyst today. Analyst Tamy Chen from BMO Capital downgraded the rating on the stock to a Hold and gave it a C$75.00 price target.
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Tamy Chen’s rating is based on a combination of factors that suggest a cautious outlook for Alimentation Couche-Tard Inc. The analysis indicates that the company’s organic growth is expected to be modest, with a projected 1-2% annual increase in EBIT for the fiscal years 2026 and 2027. This tepid growth is attributed to a slight recovery in U.S. merchandise same-store sales (SSS) and minor margin expansion, which are counterbalanced by rising operating expenses.
Additionally, the company’s valuation does not appear compelling at this time, as the anticipated improvement in U.S. merchandise SSS may not materialize quickly. The report also highlights challenges in the product mix, particularly with cigarettes, which remain a significant category but face increasing headwinds. While other categories like Other Tobacco Products and prepared food show potential for growth, their current contribution to the overall mix is limited. These factors contribute to the Hold rating, as substantial improvements in U.S. merchandise SSS and a slowdown in operating expense growth are needed to justify a more optimistic outlook.