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.
Bernstein Research, which just downgraded Research In Motion Ltd. last month, lowered its rating on the BlackBerry another notch today, now advising investors to steer clear of the company as it prepares to report quarterly earnings next week.
But another analyst today reiterated RIM as a "top pick," while yet another nudged up his price target - once again highlighting the sharp division on the Street over the company's future.
Bernstein analyst Pierre Ferragu said his own “channel checks” at carriers show that consumers’ appetite for the new BlackBerry 10 devices is weakening, and he thinks the company will miss Wall Street financial expectations for the second half of this year.
“The initial enthusiasm that we observed for BlackBerry 10 devices now appears to be waning,” he said in a research note to clients.
Mr. Ferragu said that he is also concerned that the new BlackBerry 10 devices won’t win over many corporate customers. “BlackBerry 10 is being tested at only 60 per cent of Fortune 500 companies, which implies the share of defectors could be very large,” he said.
Mr. Ferragu now rates RIM as “underperform,” down from “market perform.” Prior to mid-May, he had rated the stock as “outperform.” He cut his price target to $10 (U.S.) from $15, while also scaling back estimates for shipments, gross margin and service revenue for the second half of the fiscal year and beyond.
The Bernstein downgrade comes one day after analysts at RBC Dominion Securities offered their own, more upbeat, assessment of the BlackBerry maker, which has seen its stock surge about 130 per cent since its lows of last year.
RBC analysts Mark Sue and Paul Treiber raised their BlackBerry 10 shipment forecasts for the year to 14 million from 11 million, while also predicting RIM to post a profit in the current fiscal year.
The optimistic tone of the RBC note helped RIM to rally 3.7 per cent on the Nasdaq Tuesday. But today, the stock gave up all those gains amid the Bernstein report, closing down 4.4 per cent at $14.18.
RBC and Bernstein notes aren't the only ones kicking around today. Macquarie analyst Kevin Smithen raised his price target on RIM today to $13.50 from $13, while affirming a "neutral" rating, according to Bloomberg data.
And, in an especially upbeat assessment, Cormark Securities analyst Richard Tse today reiterated RIM as a "top pick," with a price target of $20. That's among the highest targets on the Street.
"RIM"s platform transition is an uphill battle," commented Mr. Tse. "That said, the company's surprising operational progress has given it time to bridge the gap between BB7 and BB10.
"With an underlying net asset value per share of $13.50, we like the risk-to-reward when paired with a new product cycle," he said.
Mr. Tse also sees potential for a resurgence in services revenue at RIM, but isn't factoring that into his forecasts yet.
RIM reports first-quarter results on June 28.
Target: The average price target among analysts is $12.97 (U.S.), according to Bloomberg.
Fortuna Silver Mines Inc. had been a non-stop growth story, but since 2012 seems to be losing some of that momentum given lower margins at its Caylloma mine in Peru and the last leg of growth at the San Jose mine in Mexico, commented CIBC World Markets analyst Leon Esterhuizen.
But there have been some recent announcements that point to further growth, including significant additional high-grade ore finds and expanded output at San Jose - at no extra costs - thanks to the optimization of equipment.
Target: Mr. Esterhuizen reiterated a “sector outperform” rating and $6 price target. The average price target is $4.99.
The recent acquisition of a manufacturer and a new product introduction in Japan should help medical device company NuVasive Inc. expand its margins, said Canaccord Genuity analyst Willian Plovanic.
“All in, we believe operating margins could expand by about 480 basis points over the next two years,” he said.
Target: Mr. Plovanic raised his price target to $29 from $24.50 and reiterated a “buy” rating. The average target is $23.57.
Canaccord Genuity analyst Jeffrey Frelick believes several growth opportunities have yet to unfold at OraSure Technologies Inc., a maker of diagnostic products.
One in particular is its HIV home testing product, and there's some evidence that the company is having some success in building consumer awareness.
“While awareness for home HIV testing is improving, OSUR also needs to change consumer behaviour, where awareness leads to testing,” he said.
Target: Mr. Frelick maintained a “buy” rating with a $10 (U.S.) price target. The average target is $9.
Tamarack Valley Energy Ltd. is one of the most promising junior producers given its assets in two of the most prolific light oil plays in Western Canada - the Cardium and Viking formations, said Clarus Securities analyst Daniel Choi.
Through a focus on high a high internal rate of return and quick payback wells, the team has been able to increase per share metrics substantially despite challenging capital markets, he said.
"We are forecasting significant growth in 2013 and 2014 while spending only about 1.1 times of cash flow. While we expect a company of Tamarack’s quality to be trading at a premium, its current valuation of ~$39,000/boe/d and 3.3x 2013E EV/DACF make it one of the most discounted producers. We believe the disconnect should close in the coming quarters as the management team executes on its sustainable growth strategy," he said.
Target: Mr. Choi initiated coverage with a "buy" rating and $4 price target. The average target is $3.87.
For more analyst actions, breaking investing news and analysis, follow Darcy Keith on Twitter at @ eyeonequities
|FVI-T Fortuna Silver Mines||4.24||
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|TVE-X Tamarack Valley Energy||6.01||
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|OSUR-Q OraSure Technologies||6.75||
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|BBRY-Q BlackBerry Limited||7.20||
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