Inside the Market's roundup of some of today's key analyst actions
Dell Inc. shares are tacking on significant gains today after rallying 13 per cent on Monday, as traders place bets on whether the company will be taken private.
Bloomberg News Monday, quoting unnamed sources, said the tech bellwether may announce a deal as early as this week to go private. But the news agency’s sources also cautioned that the discussions could fall apart because the buyout firms may not be able to secure the required financing or resolve how to exit the investment in the future. Reuters has also reported that the talks are at an advanced stage, with at least four major banks lined up to provide financing.
Today, at least two analysts hiked their targets on the stock as the buyout speculation continued to swirl. Deutsche Bank bumped up its target to $15 (U.S.) from $13, and Jefferies raised its target to $13 from $10.
A key question for those trading the stock in anticipation of a deal is what the offering price will be. Jefferies offered a guess: “We believe a $15 to $17 take-out price is possible with the biggest variable being finding private equity firms willing to contribute about $5-billion in equity alongside Michael Dell’s stake,” it said in a research note.
Dell shares in late afternoon trading were up 81 cents, or 6.6 per cent, at $13.10. So, if Jefferies is correct, Dell could see a bid 14 per cent to 30 per cent above the current trading price.
But it’s undoubtedly a dangerous speculative play. The average price target on the Street right now is $12.13, below this afternoon’s trading price, according to Bloomberg data. Analyst views are mixed, with 16 recommending Dell as a buy, 19 as a hold, and three as a sell.
Guyana Goldfields Inc. has released a significantly improved feasibility study for its Aurora gold project, prompting RBC Dominion Securities to upgrade the stock to an “outperform” rating.
The study now calls for a phased-in approach to reduce initial capital expenditures by more than half, while a streamlined open-pit plan combined with a new underground mining method promises to lower costs by $100 (U.S.) an ounce.
“We see attractive risk/reward at current levels,” commented RBC analyst Sam Crittenden, who previously rated the stock as a “sector perform.”
Upside: Mr. Crittenden also raised his price target by 50 cents to $6.
BMO Nesbitt Burns analyst Mark Lutenski initiated coverage of Hyatt Hotels Corp. with an “outperform” rating, calling the company “a growth story that is an acquired taste.”
Hyatt has a pipeline of new hotels equal to 29 per cent of its existing rooms, the largest within its peer group. But it’s also a stock with considerable margin and earnings volatility because of leased and owned hotels that generate 50 per cent of its EBITDA, he said.
“We think the combination of that volatility and limited earnings guidance erodes confidence in consensus estimates, and through that, valuation,” Mr. Lutenski said.
Upside: Mr. Lutenski set a $45 (U.S.) price target.
Salman Partners initiated coverage on MBAC Fertilizer Corp. with a “buy” rating, believing the company will become the next significant integrated fertilizer producer in Brazil.
Analyst Andrea Rubakovic likes the stock for its very experienced management team and portfolio of fertilizer projects, including the flagship Itafos phosphate project, expected to start up early this year.
Upside: Ms. Rubakovic set a 12-month target price of $5.40 (Canadian).
Harry Winston Diamond Corp.’s change in direction to becoming a “pure” mining company is positive for its shareholders, said Desjardins Securities analyst John Hughes. Harry Winston announced a sale of its retail division to Swatch Group of Switzerland for $1-billion (U.S.) including debt, leaving the company with its 40 per cent stake in the Diavik diamond mine in the Northwest Territories as its main asset.
Upside: Mr. Hughes raised his price target to $15.65 from $14.25 and maintained a “hold” rating.
For more analyst actions, breaking investing news and analysis, follow Darcy Keith on Twitter at @eyeonequities