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Noah Zivitz

Managing Editor, BNN Bloomberg

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Toronto-Dominion Bank has been upgraded for the second time in less than a week as another analyst took a shine to the stock after its latest results.
 
Mike Rizvanovic at Keefe, Bruyette & Woods boosted his view on TD to outperform (the equivalent of a buy recommendation) from market perform Thursday night. He also raised his price target to $103 per share from $90, implying 27 per cent potential upside from Thursday's closing price on the Toronto Stock Exchange.
 
He based his upgrade on what he called a "compelling growth story" as TD aims to expand in the United States with its U$13.4-billion acquisition of First Horizon Corp. and a US$1.3-billion purchase of Cowen Inc. Both of those transactions still require final regulatory approvals.
 
Rizvanovic also cited TD's exposure to rising interest rates, particularly in comparison to its peers; and he stated TD has a "favourable valuation relative to historical levels that we don't believe reflects its superior growth profile through fiscal 2024."
 
The benefit from higher interest rates was particularly evident in TD's U.S. retail division when the bank reported fiscal third-quarter results last week. The unit saw its net interest margin — which measures the difference between how much a bank generates from interest on loans versus how much it pays in interest — jump to 2.62 per cent from 2.21 per cent in the second quarter.
 
With the upgrade, TD joined National Bank of Canada and Bank of Montreal as the Canadian banks that Rizvanovic has outperform ratings on. In contrast, he has a market perform call on The Bank of Nova Scotia and Canadian Imperial Bank of Commerce, and an underperform rating on Royal Bank of Canada.
 
Darko Mihelic, Rizvanovic's peer at RBC Capital Markets, raised TD to outperform last Thursday, citing growth that is "getting too hard to ignore" and a Canadian banking business that he described in a note to clients as "fighting back."
 
The 16 analysts tracked by Bloomberg are evenly split between buy and hold recommendations on TD. Their consensus 12-month price target is $100.10, implying a potential return of 18 per cent from Thursday's price.

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