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Canaccord Genuity Reports Weak Q1 Results

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The global economic downturn has significantly impacted Canada-based Canaccord Genuity’s fiscal first-quarter results.

Financial services firm Canaccord Genuity Group, Inc. (TSE: CF) has reported weak results for the first quarter of Fiscal 2023 (ended June 30). This is the first time in the last two years that the company’s earnings fell short of expectations.

What Does Canaccord Genuity Do?

Headquartered in Vancouver, Canaccord Genuity offers brokerage and wealth management services across the world. It has wealth management offices in the Isle of Man and Australia, the UK, and Jersey and Guernsey. It has capital markets offices in Australia, the Middle East, Asia, Europe, the UK, and North America.

Q1 Results in Detail

Earnings declined 85% year-over-year to 11 cents per share, missing the Street’s estimate of 31 cents per share.

Total revenues fell 37.2% to C$328.8 million. Revenues of the wealth management division decreased 16.8% year-over-year to C$162.2 million, and the segment’s total client assets slipped 4.4% to C$90.7 billion.

Revenues of the Capital Markets division totaled C$164.1 million, down 49.4% year-over-year, primarily due to a reduction in investment banking revenues across the world.

The company ended the quarter with cash and cash equivalents of C$1 billion, lower than C$1.8 billion in the previous quarter.

The President and CEO of Canaccord Genuity, Dan Daviau, said, “The abrupt deceleration in global markets impacted first fiscal quarter financial performance in all of our capital markets businesses and to a lesser degree, our wealth management businesses. In addition to the more challenging backdrop, our quarterly results were impacted by markdowns of certain inventory positions held in connection with supporting our capital markets clients in Australia and Canada.”

“Looking forward, we expect that economic conditions will continue to tighten before they improve but we continue to be active globally and we feel good about our market position, the outlook for our wealth management businesses and a continuance of strong M&A activity in our capital markets businesses,” Daviau added.

Analysts Like Canaccord Genuity

On TipRanks, Canaccord Genuity has a Strong Buy consensus rating based on three Buys. CF’s average price target of C$13.32 implies 34% upside potential to current levels.

The consensus rating is supported by the Buy rating Stephen Boland of Raymond James (NYSE: RJF) provided on the stock. The analyst has a price target of C$11.50 (15.7% upside potential) on the stock.

Commenting on the company’s valuation, Boland said, “The value of Canaccord’s wealth management assets is worth substantially more than the current market capitalization. Investors are buying the total wealth management assets at a discount with the company’s capital markets revenue for free.”

Is Canaccord Genuity a Good Investment Bet?

Even though CF stock has lost almost 35% so far this year, investors should wait and watch before offloading their stake in the company. This is because the stock has doubled in the last three years.

However, the 35% year-to-date decline has been largely due to volatility in the market and has nothing to do with the investment banking firm’s operations.

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