Inside the Market's roundup of some of today's key analyst actions
Conflicting analyst views on Research In Motion Ltd. keep pouring in, further illustrating the deep divide on the Street right now on the company’s chances for a successful turnaround.
Today, Wedge Partners analyst Brian Blair issued a research note arguing that the recent positive vibe over the coming launch of the BlackBerry 10 has “provided false hope for investors.”
“We believe the run up in the stock miscalculates the reality of consumer demand for BB10 next year,” Forbes.com quoted him as saying.
“We think every piece of positive sentiment around BB10 recently is a stretch and we don’t see any scenario where the new device could make a meaningful dent in the consumer or enterprise market next year in the face of strengthening competition from Apple and the boatload of Android licensees or the growing cadre of hardware players selling Windows-based phones,” he wrote.
He drew a comparison to the optimism that met the PlayBook launch. Sales of that tablet, of course, didn’t exactly go well.
Mr. Blair’s view echoes much of Morgan Stanley’s Ehud Gelblum, who Tuesday said BB10 has a low chance of success and has come too late to a marketplace saturated with clever smartphones.
But these views came after a string of positive research notes and price hikes on RIM, including from CIBC World Markets, National Bank Financial and Jefferies & Co.
RIM shares, which at the open today were down near five per cent, rebounded at midday and were trading up 38 cents, or 3.5 per cent, at $11.08 on the TSX shortly after 1 p.m. (ET).
Sentiment earlier in the day was no doubt hurt by news that Finnish mobile giant Nokia Corp. is suing the BlackBerry maker, alleging a breach of a licensing agreement between the two companies.
While not a welcome development for RIM, analysts were quick to put the possible impact on Canada’s tech giant in perspective. “It looks like if RIM loses to Nokia the cost could be $5-10 per smartphone, so $175 to $350-million on our 35 million handset shipments forecast next year,” commented National Bank Financial analyst Kris Thompson. “A potential few per cent points hit to our gross margin forecast. Negative, but for sure not RIM’s primary concern right now.”
There was also further indication today that some fund managers have been betting big that RIM is on the path to recovery. Bloomberg reported that Yacktman Asset Management, the $19-billion (U.S.) fund run by Donald Yacktman, bought 12.2 million shares of RIM last quarter. That doubled its stake to about $252-million. Mr. Yacktman has historically done well against peers by picking undervalued stocks.
Yacktman, as of the end of the quarter, was RIM’s fifth largest shareholder, with a 4.5 per cent stake, according to Bloomberg.
RBC Dominion Securities has named Interfor Ltd. as its “top pick” among the 21 North American paper and forest products stocks that it follows. Analyst Paul Quinn believes lumber prices are set to trend higher in 2013 thanks to a strong recovery in the U.S. housing market and growing Chinese demand. Interfor is in a great position to benefit, especially given the stock’s inexpensive valuations when compared to peers, he said.
Upside: Mr. Quinn, who upgraded the rating from “outperform,” raised his price target by $1.50 to $9.50.
Industrial Alliance Securities analyst Ben Jekic believes the two-year lows Major Drilling Group International Inc. is trading at makes for a “solid entry point.” Like last year, global mining companies completed their 2012 drilling programs in October without extending them into November and December. While management believes this will lead to a seasonal loss in the fiscal third quarter, Mr. Jekic notes that the company has $30-million in net cash on hand and remains in a position to capitalize on acquisition opportunities and to continue rig modernization.
Upside: Mr. Jekic maintained a “buy” rating but cut his price target by $1 to $14.
Alimentation Couche-Tard Inc. will benefit from its recent European acquisition of Statoil Fuel & Retail ASA, which has opened up a new market for growth, said Desjardins Securities analyst Keith Howlett.
“It will take three or four more quarters to be comfortable that the integration of SFR will unfold as planned,” Mr. Howlett wrote in a research note. “Couche-Tard is establishing itself as a global convenience store operator, along with 7-Eleven. More acquisition opportunities will present themselves, and we fully expect Couche-Tard to remain a disciplined acquirer.”
Upside: Mr. Howlett rates the stock “buy” and has a $54 price target.
Ritchie Bros. Auctioneers is poised to benefit from “meaningful free cash flow growth over the next few years,” Raymond James analyst Ben Cherniavsky said.
“While we maintain a relatively cautious stance on the equipment sector at large, we believe strongly that now is a good time to buy Ritchie Bros.' stock,” Mr. Cherniavsky wrote, citing growth in the global used-equipment market and strategic changes at the company.
Upside: Mr. Cherniavsky raised his price target from $23 (U.S.) to $25 and rates the stock “outperform.”
BMO Nesbitt Burns analyst Michael Mazar is advising investors to stay clear of Poseidon Concepts Corp., even after its recent stock plunge left the designer of tanks for fluids used in fracking trading at a “seemingly attractive” valuation. He believes the monthly dividend early in the new year will be cut by more than half to 4 cents a share, “in order to have some semblance of sustainability.” A slowdown in drilling and well completion resulted in the company reporting quarterly results earlier this month that were well below Street estimates.
Downside: Mr. Mazar reiterated an “underperform” rating and cut his price target by $2 to $5.
For more analyst actions, breaking investing news and analysis, follow Darcy Keith on Twitter at @eyeonequities