M Partners analyst Scott Chan has boosted his rating on Sprott Inc. to a "buy," and raised his one-year target to $5.25 a share from $5.00.
It is the first "buy" rating in recent memory among analysts covering the stock of the investment firm. Four still have a "hold" rating, while two others have a "sell" recommendation. See previous Fund Watch blog.
Because of strengthening fund performance and several growth initiatives, "we believe Sprott Inc. is well positioned for future asset growth and we are more confident that Sprott will be able to hit our performance fee targets for 2011," Mr. Chan wrote in a note on Thursday.
Mr. Chan increased his net sales estimate for Sprott to $500-million from $400-million for 2011 to reflect new products, and is maintaining a $700-million net sales estimate for 2010. (Sprott generated $417-million in net sales for the first quarter.)
"We have become more comfortable with our 2010 performance fee estimate of about $30-million, and 2011 estimate of $46.6-million from better year-to-date performance versus its benchmarks for its public mutual funds (slowly catching up to high water marks), positive hedge fund performance year to date and expected performance fees from Sprott Resource Corp., specifically its investment in Stonegate Agricom Ltd. going public."
The sovereign debt crisis caused the European Central Bank to announce $1-trillion (U.S.) rescue package, the analyst noted.
"As a result, investors piled back into gold bullion, which reached a record high two days ago of $1,239.93 per ounce. We believe, that if current conditions persist, Sprott is in position to significantly outperform its peers and benchmarks, as its investment thesis plays out, particularly long bullion (gold and silver), overweight resource and energy stocks, short financials and consumer related stocks."
You can read Sprott CEO Eric Sprott's view on the European crisis here.