Analysts quickly chop price targets as Barrick shares get clobbered

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Inside the Market's roundup of some of today's key analyst actions

Analysts are quickly reassessing their targets again on Barrick Gold Corp. in the aftermath of its near free-fall this month that has left the company trading at 10-year lows – and less than half of its levels just six months ago.

JPMorgan analyst John Bridges went as far as to downgrade Barrick today, now rating the stock as "neutral" instead of "overweight."

Barrick shares lost more than 10 per cent of their value alone today. The gold producer has seen one of the most harshest selloffs in the precious metals sector as the price of bullion started to collapse.

Some of Barrick's price decline in recent days was pegged to the mining giant suspending work on its huge gold and silver project in Chile, Pascua-Lama. That decision arose from a court order related to allegations of pollution of groundwater and rivers in a desert area. No allegations have been proven, but the appeals court decision will set back an $8-billion mine that's already over budget and behind the original schedule.

Disappointment over Pascua-Lama prompted a number of price target hikes earlier this month, including from RBC Dominion Securities and Credit Suisse.

Other analysts joined the fray today, including JPMorgan's Mr. Bridges, who cut his target to $35 (U.S.) from $47, and BMO Nesbitt Burns analyst David Haughton, who lowered his target to $32.50 from $39. Mr. Haughton had last cut his target on April 11; prior to that cut to $39, his 12-month price target was $46, Bloomberg data show.

Mr. Bridges commented that Barrick has entered a different, more challenging era in the industry that is more focused on cash flows, and the company has to slow to adapt.

"Having some of the industry's biggest mines, Barrick has been most exposed to capital spending overruns and is still in growth mode while investors have changed," Benzinga.com quoted Mr. Bridges as saying. "The company now faces demands from the Dominican Republic for a bigger share of early cashflow from its PV project and now faces added complexity as it has been forced to cease construction on the Chilean side of its Pascua Lama project. These uncertainties have been compounded by the recent pullback in gold prices, which we suspect could be anticipating further strengthening of the U.S. dollar."

Target: The average price target as of this afternoon among analysts is $38.60 (U.S.), according to Bloomberg.

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Dollarama Inc. is being treated to a bevy of analyst price hikes today after it reported better-than-expected earnings last week and raised its dividend.

Revenues in the quarter rose 19.9 per cent to $562-million, beating the consensus estimate of $555-million, as same-store sales rose 4.6 per cent.

Analysts are particularly encouraged because they expect that type of growth to continue as it dominates the dollar-star retailing sector in this country.

"Dollarama is expanding the dollar store segment, gaining market share within the segment as the presence of franchised chains and independent stores declines, and occupying a portion of themarket space vacated by ailing small format discount chains (Fields, Bargain Shoppe, Liquidation World, Hart Stores, etc)," commented Desjardins Securities analyst Keith Howlett. "Dollarama may acquire locations resulting from shrinkage of these chains. Our view is that the entry of Target will also be of benefit to Dollarama, which prefers to locate close to successful large format discount stores and grocery stores.

Target: Industrial Alliance Securities analyst Neil Linsdell raised his price target to $76 from $67; CIBC World Markets analyst Perry Caicco hiked his to $80 from $73; Desjardins' Mr. Howlett raised his to $75 from $70; Raymond James analyst Kenric S. Tyghe hiked his to $67 from $65. The average price target on the Street now is $75.

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CGI Group Inc.'s restructuring of newly acquired U.K. IT firm Logica PLC is ahead of schedule, helping to overshadow a tough macroeconomic environment, said RBC Dominion Securities analyst Paul Treiber.

He upgraded CGI to "outperform" from "sector perform" while increasing his earnings estimates for CGI's fiscal 2013 and 2014, commenting that earlier-than-expected employee departures at Logica "suggest a more rapid pace of margin expansion."

"CGI's transformation of Logica involves the shift in control from Logica's ineffective global matrix structure to local management," Mr. Treiber said in a research note. "The move to a country model better accommodates the diversity of Logica's regional businesses and strengthens its relationships with domestic-based multinationals and large local clients, where competition is lower and pricing is more attractive. This is similar to CGI's existing business in Canada and the U.S."

Target: Mr. Treiber raised his price target to $33 from $28. The average price target is $30.31.

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Ice hockey equipment sales went into the deep freeze in Bauer Performance Sports Ltd.'s latest quarter, prompting a downgrade of the stock by CIBC World Markets analyst Mark Petrie.

Revenues from Bauer's hockey segment fell 9 per cent in its third quarter, hurt in part by elevated retail inventories and aggressive pricing from competitors, noted Mr. Petrie, who lowered his rating on the stock to "sector performer." At well, a change in tariffs in Canada on sports equipment has meant a revaluation of inventories.

On the bright side, apparel and lacrosse sales are gaining momentum.

"Though Bauer remains a clear leader in its industry with nice growth potential in segments outside of ice hockey, near-term upside appears limited as it works through a challenging time in the industry," Mr. Petrie said.

Target: Mr. Petrie maintained a $13 price target. The average price target is $13.41.

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RBC Dominion Securities analyst Haran Posner downgraded Postmedia Network Canada Corp. to "underperform" from "sector perform," citing the lack of revenue improvement in the newspaper company's latest quarter.

"Although Q2 EBITDA was slightly ahead of our forecast, print advertising revenue pressure continues unabated (59 per cent of total revenue) while digital revenue growth (12 per cent of total revenue) remains uneven and mostly below our expectations," Mr. Posner said in a note. "While management continues to successfully execute on the cost side of its three-year transformation plan, in the absence of some stabilization in print advertising revenues and/or more robust digital revenue growth, we believe it could get increasingly more difficult to offset continued revenue declines with further cost savings."

Target: Mr. Posner cut his price target to $1.00 from $1.25. The average price target is $1.

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