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An Apple iPhone 5 is displayed in an Apple store in Rome (© Tony Gentile / Reuters)
An Apple iPhone 5 is displayed in an Apple store in Rome (© Tony Gentile / Reuters)

Eye on Equities

Apple, Teck face lower price targets Add to ...

Analysts slashed their targets on Apple Inc. after the iconic consumer electronics maker suffered its first annual drop in profit in a decade, but many still remain bullish on the stock.

RBC Dominion Securities analyst Amit Daryanani cut his target on Apple by $75 (U.S.) a share to $475. The average target on the Street is $545.08 a share, according to Bloomberg data.

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“We believe the stock is stuck in a trading range between $375 to $ 425 a share until we witness the launches [of new and updated products] in the ‘fall’ time frame,” he said Wednesday in a report.

While Apple’s first-quarter profit was slightly above consensus expectations and revenue was stronger than expected versus a year ago, gross margins were “disappointing at 37.5 per cent,” said Mr. Daryanani, who is still maintaining his “outperform” rating.

“We believe the recent pullback on Apple’s stock creates an attractive entry point for investors to benefit from its ability to sustain material revenue and earnings per share growth over the next several years,” he said.

Multiple catalysts remain as the company benefits from iPhone 5 sales, the ramp-up of the iPhone mini, Macbook refreshes and potential introduction of the iTV or other products, he added.

When Apple released its results on Tuesday, it also announced a plan to increase its buyback program to $60-billion until December 2015, and raised its dividend to $3.05 a share, a 15 per cent increase.

Canaccord Genuity analyst Michael Walkley, who maintains a “buy” rating, reduced his target by $40 a share to $560. “June quarter revenue and margin guidance failed to meet even our below-consensus estimates as refreshes of key iPhone and iPad products are not expected to occur until the fall,” he wrote in a report.

“We maintain our belief that Apple is well positioned to leverage its leading iOS ecosystem and large installed base, and new product launches expected in the second half of this year should result in re-accelerating year-over-year earnings growth during the September quarter,” Mr. Walkley added.

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TD Securities analyst Greg Barnes cut his target on Teck Resources Ltd. because weakening global macro-environment indicators “suggest that demand for both copper and coal should be soft over the next several quarters, and that commodity prices will move sideways at best.”

Target: The analyst, who maintained a “hold” rating, cut his target on the miner by $1 (Canadian) a share to $32. The average Street target is $37.43 a share.

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Major Drilling Group International Inc. faces headwinds from a falling gold price that will make it difficult for junior miners to make money and force them to cut exploration budgets, said TD Securities analyst Steven Green.

Target: He cut his target on the mining driller by $2.50 a share to $12. The average Street target is $11.20 a share.

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Canaccord Genuity analyst Phil Skolnick downgraded Athabasca Oil Corp. to a “hold” rating after its stock tumbled 15 per cent on Tuesday on concerns that a regulatory hearing will delay its ability to sell a 40-per-cent stake in the Dover oil sands project.

Target: The analyst cut his target by $3.50 a share to $13. The average Street target is $14.46 a share.

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This year will be a pivotal one for Encana Corp. as it tries to re-establish operating momentum, find a new CEO and dispose of up to $1-billion in assets, according to Greg Pardy of RBC Dominion Securities. He has a “sector perform” rating on the stock, which is trading at valuations above that of its peer group.

Target: Mr. Pardy is lowering his target for the share price to $22 (U.S.) from $23. The consensus target among analysts is $21.48.

Follow on Twitter: @IanMcGugan

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