File photo of a Niko Resources drilling platform.
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.
Canaccord Genuity analyst Christopher Brown downgraded Niko Resources Ltd. to "hold" from "buy" as financing concerns intensify at the company, highlighted by its recent delinquency on rig payments.
"We maintain our stance that the value associated with Niko's asset base is multiples above the company's current trading price," Mr. Brown said in a research note. "However, with the company's line of credit under review (and expected to decline) and with no timeline on Niko's divestiture process, it is difficult to determine when a share-price turnaround could potentially occur.
"We believe the company needs to see its way through a likely near-term reduction on its line of credit before shareholders can regain some confidence in the company," he added.
Target: Mr. Brown slashed his price target to $6 (Canadian) from $13.50. The average price target among analysts is $9.13, according to Bloomberg data.
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Canaccord Genuity analyst Jonathan Dorsheimer upgraded Cree Inc. to "buy" from "hold," citing the light bulb technology company's improving cost structure and continued momentum in design improvements.
"We conclude that Cree's second generation 60W-eq bulb at Home Depot has a better cost structure, raising its gross margins to somewhere in the mid-teens from the mid- to high-single-digits previously, which should aid overall Lighting Systems gross margins," Mr. Dorsheimer said. "Our meetings with the supply chain in Asia suggest that Cree is also working on a third-generation design in which the cost can be further reduced."
While conceding the stock is not cheap, he thinks the company can still grow its earnings faster than the overall market given its leading status in the sector and growing brand recognition.
Target: Mr. Dorsheimer raised his price target to $80 (U.S.). The average target is $66.35.
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CIBC World Markets analyst Alex Avery downgraded Brookfield Office Properties Corp. to "sector perform" from "sector outperformer" after the stock surged 14 per cent Monday on news Brookfield Property Partners plans to buy the rest of the company it doesn't already own.
"With the proposed tender offer expected to take several months, full details of the proposal not expected to be available to investors until February, 2014, and the share price appreciation bringing BPO shares to within 5 per cent of our $20 price target, our ratings change reflects expectations for a period of up to six months in which BPO (Brookfield Office) shares trade closely with BPY (Brookfield Property) units," he said.
Separately, Citigroup today upgraded Brookfield Office Properties to "neutral" from "sell" and raised its price target to $19.34 - the value of Brookfield Property's offer - from $15.
But RBC Dominion Securities analyst Neil Downey thinks the bid is "somewhat on the low side," and he raised his price target to $21.50 (U.S.) from $20, while reiterating an "outperform" rating. He sees potential for a modest improvement in the offering price, especially if the valuation of Brookfield Property shares improve by the time any transaction is completed.
Target: The average target among analysts is $19.73.
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Credit Suisse analyst David Hartley has initiated coverage on Empire Co. Ltd. with an "outperform" rating, believing that the grocer is well positioned to drive revenue growth.
Empire, which owns the Sobeys grocery chain and recently announced a deal to purchase the Canada Safeway stores, has a strong record of creating value for shareholders. Mr. Hartley expects this to continue, forecasting a compounded annual growth rate in earnings per share of 15 per cent from 2013 to 2016. He predicts free cash flow will climb to $531-million in 2016 from $256-million in 2013.
While there are challenging fundamentals in the grocery sector, companies such as Empire that are seeing cost efficiencies from acquisitions should reap rewards, he said.
"The Safeway acquisition is an important catalyst towards cost synergies and longer-term profitability growth," he said.
Target: Mr. Hartley set an $87 (Canadian) price target. The average target is $83.86.
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Lonestar West Inc.'s growth plans are on track but the recent appreciation in its share price has made the stock less attractive, said Industrial Alliance Securities analyst Al Nagaraj in downgrading his rating to "hold" from "buy."
Lonestar provides trucks to the utility and oil and gas industries and this sector should continue to expand. Canada's electricity industry is expected to invest about $294-billion from 2010 to 2030, while another $230-billion in oil and gas infrastructure spending is expected through 2035 in North America.
"Lonestar will benefit directly due to the capital spending growth in its customers' end markets for a long period of time," Mr. Nagaraj commented.
Target: Mr. Nagaraj reiterated a $4 price target. The average target is $4.50.
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In other analyst actions today:
Raymond James raised its price target on Genivar to $30 (Canadian) from $27 and maintained an "outperform" rating.
Citigroup raised its price target on Yahoo to $39 (U.S.) from $31.
Goldman Sachs raised its price target on Merck to $54 from $52 and maintained a "neutral" rating.
Canaccord Genuity upgraded Deckers Outdoor to "buy" from "hold" and raised its price target to $80 (U.S.) from $55.
Canaccrd Genuity downgraded Universal Display to "sell" from "hold" and cut its price target to $19 from $30.
M Partners cut its price target on Rocky Mountain Dealerships to $17.35 (Canadian) from $20 and reiterated a "buy" rating.
Oppenheimer cut its price target on J.C. Penney to $9 (U.S.) from $15.
Jefferies upgraded FirstEnergy to "hold" from "underperform" and raised its price target to $36.50 (U.S.) from $33.50.
Credit Suisse upgraded Petrominerales to "neutral" from "underperform" and raised its price target to $11.50 (Canadian) from $6.25.
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For more analyst actions, breaking investing news and analysis, follow Darcy Keith on Twitter at @eyeonequities
Darcy Keith