Inside the Market’s roundup of some of today’s key analyst actions. This post will be updated with more analyst commentary during the trading day.
RBC Dominion Securities analyst Walter Spracklin upgraded Cargojet Inc. to a "top pick" recommendation, believing that the market is only pricing in the company's core business and not future growth opportunities.
"We see significant value in the Cargojet shares at current valuations," said Mr. Spracklin. "While volume and pricing trends have been improving, we believe that an improved core business is only half the story. With significant growth opportunities on the horizon, we see these opportunities as free options that further enhance the value in the CJT shares."
Cargojet primarily provides overnight cargo services in Canada. But there are several potential growth opportunities, the analyst points out. These include further expansion into Atlantic Canada and additional charter opportunities. Cargojet is also set to bid on the recent Canada Post airfreight tender, which - if awarded - would be transformational to the company's revenues.
Target: Mr. Spracklin, who previously rated the stock as an "outperform," raised his price target by $2 to $13. The average price target is $12.
Yield-hungry investors should consider buying Allied Properties REIT, said Raymond James analyst Ken Avalos, who upgraded the trust to “outperform” from “market perform.”
Allied is trading at about a 5 per cent premium to his forward 12-month net asset value estimate. He thinks a premium of 15 per cent is justified, however, given the company’s growth prospects, “quality” balance sheet and management’s track record of creating value for unitholders.
“While clearly forward looking and having some element of execution risk, we believe the risk/reward is compelling given AP’s sector leading growth prospects and top tier balance sheet, as well as relative value versus other Canadian REITs,” Mr. Avalos said in a research note.
“Allied’s management is among the best in Canada at deploying capital with discipline and in a NAV-accretive fashion on the new acquisition front, as well as excellent at mining value creation opportunities within the existing portfolio,” he said.
Target: Mr. Avalos set a six- to 12-month price target of $37.50. The average price target among analysts is $35.73, according to Bloomberg data.
North American Palladium Ltd. only has about one month before it runs out of cash, making it critical for the company to issue new equity immediately, warned Raymond James analyst Alex Terentiew.
In anticipation of the new equity financing, and a slew of challenges faced by the company, Mr. Terentiew downgraded North American Palladium to “market perform” from “outperform.” RBC Dominion Securities analyst Sam Crittenden issued an even harsher downgrade, lowering his rating to “underperform” from “sector perform,” citing similar concerns.
“With its chief operating officer departing, an LDI operations review ongoing, and need for financing enhanced due to negative preliminary revisions to 2013 production, cash costs and capex guidance, we believe the pressure falls squarely on the shoulders of the new CEO Phil du Toit to carry the company through this challenging time,” he said in a research note.
LDI, or Lac Des Iles, is the company’s flagship mine near Thunder Bay, Ont., and is undergoing an expansion. North American Palladium recently lowered its 2013 production guidance and acknowledged the need for immediate financing.
While RBC’s Mr. Crittenden slapped the equivalent of a sell rating on North American Palladium’s shares, he does see long-term potential in the stock.
“We continue to believe Lac Des Iles has the potential to grow production and become a significant palladium producer. However, we believe the shares could lag the peer group until the balance sheet is strengthened and a successful transition from open pit and ramp mining to shaft mining (at LDI) can be demonstrated,” he said.
Target: Mr. Terentiew slashed his price target to $1.40 from $2.50. Mr. Crittenden cut his target to $1.25 from $1.75. The average price target is $1.38.
Build-a-Bear Workshop ‘s latest quarterly results showed improvement in all metrics, providing a positive surprise to investors that had grown accustomed to poor financial results and deteriorating profitability, commented BMO Nesbitt Burns analyst Gerrick Johnson.
The company reported breakeven earnings per share in the first quarter, and would have posted a profit if not for costs associated with the retirement of the CEO.
“One quarter does not make a trend, but early results of the company’s long-awaited restructuring have been encouraging,” he said.
Target: Mr. Johnson raised his price target by $2 to $6 (U.S.) and reiterated a “market perform” rating. The average target is $6.
BMO Nesbitt Burns analyst John Hayes downgraded Belo Sun Mining Corp. to “market perform” after a disappointing pre-feasibility study for an open pit mine development at its Volta Grande gold project in Brazil.
“While capital costs were in line, the mined reserve was lower than expected, and the pre-feasibility study showed higher capital and operating costs,” said Mr. Hayes.
Target: Mr. Hayes, who previously rated the stock as “outperform,” has not issued a price target on the stock. The average price target on the Street is $1.89.
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