Inside the Market's roundup of some of today's key analyst actions
Northland Capital Markets analyst Darren Aftahi has upgraded Coinstar Inc. to “outperform” from “market perform,” citing indications that sales at its Redbox movie rental kiosks have improved significantly over the last six weeks thanks to hits such as The Amazing Spider-Man and Men in Black 3.
Mr. Aftahi has another reason to be bullish on Coinstar: The Redbox owner this morning announced the beta launch of its video-streaming partnership with Verizon Communications Inc. The service, which will compete directly with video rental giant Netflix Inc., will be available later this month.
Named “Redbox Instant by Verizon,” the service will sell subscriptions starting at $8 (U.S.) per month in the U.S. for unlimited streaming plus four one-night credits for DVDs.
Mr. Aftahi said the new service should help smooth out Coinstar’s quarter-to-quarter volatility in the long term.
“We have long viewed RB Instant from a different strategic light than other investors. Simply put, while the digital arm puts a proverbial hedge in place for its RB business, one of the subscription model’s major benefits is that, longer-term, it should significantly mitigate the quarter/quarter box office and revenue volatility RB has seen in the past,” Mr. Aftahi said in a research note.
Upside: Mr. Aftahi raised his price target to $62 (U.S.) from $48.
UBS Securities Canada analyst Chad Friess has upgraded Connacher Oil and Gas to “neutral” from “sell,” believing that the 80 per cent plunge in the share price over the past year adequately reflects the company’s solvency challenges.
He notes that the recent sale of the Great Falls refinery and the company’s conventional upstream assets provided some breathing room. Still, the company remains in a tight financial situation, with its debt estimated at 18 times cash flow in 2013.
“We also believe it is a buyers market for underfunded, early stage oil sands companies given the abundance of assets up for sale.”
Downside: Mr. Friess cut his price target in half to 20 cents, in part to reflect recent weakness in heavy oil prices and higher capital expenditures.
Enerplus Corp. stock has not fully recovered after the company missed third-quarter production targets, and it could take a few quarters to restore investor confidence, said Raymond James analyst Kristopher Zack.
Enerplus’s “less consistent production growth over the past few years explains the discount to our average target multiple of 7.1 times” for its peers, Mr. Zack said.
Downside: Mr. Zack lowered his price target to $16 from $18 and rates the stock “market perform.”
Silver Standard Resources Inc. ‘s Pitarrilla project in Mexico is proving to be richer in resources than expected, said CIBC World Markets analyst Barry Cooper.
“Once built, Pitarrilla promises to be a big contributor to earnings, in a new jurisdiction away from Argentina,” Mr. Cooper pointed out. “Pitarrilla hosts a large resource that could support a long-life operation.”
Upside : Mr. Cooper raised his rating from “sector perform” to “sector outperform” and his target price to $23 from $18.
Spartan Oil Corp. may well attract a third bidder, after Bonterra Energy Corp. bested Pinecrest Energy Energy Inc., said Desjardins Securities analyst Tim Murray.
“In general, we believe the proposed Bonterra acquisition presents Spartan shareholders with a healthy balance sheet from the larger entity, even if it is somewhat more levered than in the previous Pinecrest proposal,” Mr. Murray wrote in a research note. “We also note that Bonterra could utilize its premium valuation paper to acquire additional high‐cash‐flow generating assets, should its payout ratio become a cause of concern for investors.”
Downside : Mr. Murray lowered his price target on the stock to $4.92 target from $5.12.
For more analyst actions, breaking investing news and analysis, follow Darcy Keith on Twitter at @eyeonequities
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