CIBC World Markets Inc. initiated coverage of Canaccord Financial Inc. (TSX: CF.TO) with a "Sector Outperformer" rating and a price target of $14.
Paul Holden, an analyst at CIBC, said Canaccord offers an exceptional risk/reward profile at current levels.
"We do not know precisely when equity underwritings will recover, but we have a high level of conviction that they will and when they do, it will be significant and material, similar to the recovery seen in 2009," Holden wrote in a note.
Holden estimates Canaccord and Collins Stewart could earn $1.20 and $0.22, respectively, in C2013, for total earnings potential of $1.42.
Balance sheet risks appear to be contained given reasonable asset leverage, healthy working capital and little financial leverage, he said.
The stock, which has been trading between $6.94 and $16.41 over the past year, is up 3.4 percent to $8.30 on Monday.