In the Money: 5 Things to Know

Futures muted, Gap plunges, Marvell fails to impress, CIBC & RBC downgraded, BRP upgraded

It’s getting to the point where whatever I write about trade one day, you can pretty much guarantee the opposite will be true the next day. While this frustrates me, imagine having to negotiate a deal against this backdrop!

Watch full episode: On this episode Stan Wong of Scotia Wealth reveals 3 high-conviction stocks all trading near all-time highs: Dollarama (DOL), a Canadian retail juggernaut with pricing power and minimal competition; MercadoLibre (MELI), a Latin American fintech and e-commerce leader growing at 35%+; and Netflix (NFLX), where ad-supported tiers, global content, and pricing inelasticity power long-term upside.

Keepy Uppy: In 24 hours we got news that most of US President Donald Trump’s tariffs were illegal only for the Court of Appeal to say they can remain in place until they hear the case and the Trump administration said they would pursue alternative avenues for imposing tariffs. Keeping up? The markets are having a tough time with futures flat this morning. We will get a read of Fed’s preferred inflation gauge at 8:30am which is expected to decelerate. This comes after Fed Chair Jerome Powell and Trump had their first face-to-face meeting since Trump’s inauguration. As expected, Trump reiterated the Fed should be cutting rates while the Federal Reserve put out a statement saying all decisions will be based on “non-political analysis.” A reminder Powell’s term ends May 2026 so the two are stuck with each other for at least another year. In Canada we will get a read first quarter GDP as well as an advance read of April’s economic output. This will give us an indication of how much tariffs affected our GDP.

Retail therapy: Shares of the Gap are plunging 15% in the pre-market after warning tariffs will cost them up to $300 million. Sales at its smaller Banana Republic and Athleta brands fell, while Gap and Old Navy grew more than expected. The tariff burden was higher than expected, wrote Citi’s Paul Lejuez in a note to clients. The stock has been a retail darling as a turnaround play, shares were up 18% so far this year before today’s pre-market action. “While we expect GAP to be in the penalty box near-term on the Gap brand falling short of mkt expectations and tariff guidance, we believe risk/reward is especially attractive on the pre-mkt stock weakness,” wrote Lejuez. American Eagle (-8%) is also in the penalty box this morning after sales came in worse than feared and the company warned that profit was going to be lower than anticipated. American Eagle already warned investors they were going to take a hit because of tariff uncertainty and withdrew their financial forecasts two weeks ago. But the results today were worse than even those lowered expectations.

Techlandia: It’s a tough crowd for Marvell shareholders this morning. The chipmaker put up decent results - profit higher than expected while revenue increased 63% - but the outlook was only in-line with expectations. “We attribute the aftermarket stock reaction largely to lack of more meaningful upside,” wrote Srini Pajjuri of Raymond James. Shares of Dell are flat this morning even as the computer maker gave a better than expected forecast on AI demand. Orders for AI technology in this quarter surpassed all of last year, said Dell. So why the muted demand? AI servers are a smaller part of the business and margins were weaker than expected this quarter. While AI is a driver of growth, enthusiasm is tempered by the fact that there is caution out there about ex-AI IT spending.

Over draft: National Bank is downgrading CIBC and Royal Bank because of a clouded economic outlook. “We are increasingly wary of the domestic credit and growth outlooks, which has relatively greater implications for CIBC given its business mix,” wrote Gabriel Dechaine of National Bank. As for Royal Bank, he notes that recent results were disappointing and that there could be even more provisioning for loans that could go bad. “We are not able to justify using a higher valuation multiple considering the weaker credit and growth outlook,” said Dechaine in his downgrade of RBC.

Do the Doo: Sales at ski-doo and sea-doo maker BRP fell for a seventh quarter in a row but a pair of analysts say now is the time to buy the stock. Stifel and Desjardins are both upgrading the stock which has lost 40% in value over the past year. “(Falling sales) trend could end next quarter as the outlook is improving and Q2FY26 sales could increase Y/Y,” wrote Stifel’s Martin Landry. BRP has struggled post-pandemic as demand for recreational vehicles waned and then there was the added hit of tariffs driving up costs. Desjardin’s Benoit Poirier says he’s been impressed with BRP’s execution in a tough environment. Inventory has come down sharply while the tariff impact has been better than feared. “With strong FCF generation, an attractive valuation and increased confidence that the worst is over, we are upgrading DOO to Buy,” wrote Poirier.