Alimentation Couche-Tard Inc.

Alimentation Couche-Tard (TSX: ATD) Inc is a convenience store chain with locations in North America, Ireland, Scandinavia, Poland, the Baltics, and Russia. Tobacco goods, groceries, beverages, fresh food, quick service restaurants, car wash services, other retail items and services, road transportation fuel, stationary energy, marine fuel, and chemicals are the company's main sources of revenue.

Recent Highlights

• Alimentation Couche-Tard Inc. ("Couche-Tard" or the "Corporation") announced on December 20, 2021. that it has reached an agreement with Pic Quik to buy 19 convenience stores and two non-operating properties in New Mexico.
• Alimentation Couche-Tard Inc. ("Couche-Tard" or the "Corporation") confirmed that it has signed a deal with Slidell Oil Company and affiliated entities to buy 17 Purple Cow convenience outlets as well as 23 wholesale fuels accounts in three southeastern states. The transaction was completed on December 16, 2021.

Why Investor’s Should Book Profit?

• Weak margin profile: The group posted lower profitability margin in Q2 FY21, as compared to the industry median, which indicates poor operational efficiency and remains a major concern for the company. Notably, ATD reported its gross margin 18.20%, significantly lower than the industry median of 21.80%.
• Significant uptick in stock price: The company's stock price has surged 29.50% in the past nine months. From a technical standpoint, the momentum oscillator 14-day RSI (~65.44) is in the overbought zone, making price expensive at the current levels. 
• Hovering near the upper band of Bollinger band indicator: At the daily price chart, the stock of ATD closed near the upper range of its 20-days Bollinger band, indicting a possible correction from the recent level.

Valuation Methodology (Illustrative) Price to Earnings:

Source: Analysis by KalKine Solutions

Stock Recommendation:

The company's performance in the most recent quarter was solid, aided by a rise in fuel consumption across all markets. Experts believe that because Omicron is already influencing people's behavior and corporate operations, the variant will be a drag on growth early next year, decreasing enterprises' profitability in the fourth quarter. Using the Price to Earnings-based relative valuation method, we predicted a double-digit downside for the company (in percentage terms). We recommend a 'Sell' recommendation on the shares of ATD at the last traded price of CAD 53.48 on December 30, 2021.

One-Year Technical Price Chart (as on December 30, 2021). Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

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