Inside the Market’s roundup of some of today’s key analyst actions
Canaccord Genuity analyst Mike Walkley is admitting today he went a little too far in drastically slashing his sales forecasts two weeks ago for the BlackBerry Z10.
Research In Motion Ltd.’s new BlackBerry 10 smartphones went on sale in the U.K. on Jan. 31. The device has since been introduced in Canada and some other global markets, but it won’t hit U.S. store shelves until about the middle of this month.
Mr. Walkley was predicting sales of nearly two million devices until he dropped that forecast to just 300,000 on Feb. 19.
“Given our store surveys indicated modest Z10 sales in the U.K. and Canada with limited initial inventory levels, we admittedly reduced our February quarter sell-in estimates too low for the first month of the Z10 launch,” Mr. Walkley said in a research note today.
“With the Z10 launching in additional markets the last weeks of February, we have increased our February quarter BB10 smartphone sell-in estimate from 300K to 800K units,” he said.
But Mr. Walkley is hardly a bull when it comes to RIM and the new devices that are critical for its turnaround. He believes carrier support for BlackBerry 10 in the U.S. is modest, pointing to Sprint’s decision to launch only the Q10 device, and T-Mobile intentions to only to sell the Z10. RIM generally sells phones to carriers, who then sell the devices through their own retail chains.
“Our follow-up surveys have indicated steady but modest sales levels for the Z10. With new BB10 smartphones launching in the U.S. only in mid-March or later at subsidized prices no better than competing high-end Apple/Samsung smartphones, combined with our expectations for the Galaxy S IV to launch at a similar time frame in the U.S. market, we anticipate BlackBerry will struggle to reclaim high-end smartphone market share,” he said.
He believes supplies of the devices improved throughout February, which should help boost sales and lead to RIM reporting a fiscal 2013 loss per share of $1.06 – narrower than his last forecast of $1.18. He left his fiscal 2014 and 2015 estimates unchanged.
Target: Mr. Walkley maintained a “sell” rating and $9 (U.S.) price target. The average 12-month analyst target is $11.82 (U.S.)
RBC Dominion Securities analyst Fraser Phillips believes the recent decline in the share price of Lundin Mining Corp. presents investors with a buying opportunity.
He upgraded the miner to “outperform” from “sector perform,” applauding the company for its “solid operating results, growth in zinc and copper production, strong balance sheet and free cash flow, and attractive valuation.”
He recently completed a site visit to Lundin’s Tenke project in the Democratic Republic of Congo, where everything appeared to be running smoothly.
And he thinks market concerns over the company’s acquisition intentions are overdone.
“The recent correction appears to have been triggered by comments by the company that it continues to look for copper acquisition opportunities. We believe the market is overreacting,” he said.
“The company is interested in junior exploration investment opportunities with earn-in options or ready-to-build or producing assets of 30,000 to 80,000 tonnes per year of copper, and believes it has capacity to pay up to $700-million. We believe this strategy is low risk and Lundin showed discipline around its aborted Spanish acquisition in 2012,” he said.
Target: Mr. Phillips raised his price target to $6 from $5.75 (Canadian). The average Street forecast is $6.14.
Magna International Inc. is winning praise from analysts after handily beating Street forecasts for fourth-quarter earnings. Magna enjoyed double-digit earnings per share growth in 2012 from strong North American sales and improved European margins.
But Canaccord Genuity analyst David Tyerman cautioned that the surprisingly strong fourth quarter should have little forward-looking implications, as the company’s 2013 guidance was only slightly increased.
“We forecast annual EPS growth to slow to mid-high single-digit rates in 2013 and 2014 from expectations of a combination of slowing industry growth in North America, industry weakness in Europe and modest margin expansion,” he said.
Target: Mr. Tyerman raised his price target to $64 (U.S.) from $57 and maintained a “buy” rating. The average analyst price target is $60.79 (U.S.).
GMP Capital Inc. saw revenues jump 39 per cent in the final three months of 2012, but CIBC World Markets analyst Paul Holden cautions the strong results won’t continue into the current quarter. He said transaction volumes at Canada’s second-biggest non-bank brokerage are slowing again.
“Management's No. 1 priority in 2013 is integrating all business units to drive additional revenue opportunities. While company actions are positive, we are lowering our estimates for both 2013 and 2014 given the weak start to 2013 and the significant sell-off in small cap mining stocks (-20 per cent year-to-day),” Mr. Holden said.
Prior to Monday, GMP shares had climbed 16 per cent year-to-date. Mr. Holden said the “risk/reward is not as compelling today.”
Target: Mr. Holden downgraded GMP to “sector performer” from “sector outperformer“ and cut his price target by $1 to $8 (Canadian). The average Street estimate is $7.44.
Shares in Atlantic Power Corp. plunged last week after the company slashed its dividend by 65 per cent, but CIBC World Markets analyst Ian Tharp thinks the action could prove beneficial in the long run.
“Once the dust settles, we think the improved access to growth capital makes the company growth plans one step more attainable,” he said. “While our 2013 payout expectation of 125 per cent remains high, our revised 2014 payout of 82 per cent is much improved,” he said.
Target: Mr. Tharp cut his price target to $7.50 from $12 and maintained a “sector performer” rating. The average Street forecast is $7.85.
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