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Inside the Market

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The iPhone 5: Smaller carriers, which include Mobilicity and Public Mobile, doubled their collective market share of subscribers from 2 per cent to 4 per cent in 2011, but are eager to poach more valuable smartphone users – including those loyal to Apple’s iPhone. (Eric Risberg/Associated Press)
The iPhone 5: Smaller carriers, which include Mobilicity and Public Mobile, doubled their collective market share of subscribers from 2 per cent to 4 per cent in 2011, but are eager to poach more valuable smartphone users – including those loyal to Apple’s iPhone. (Eric Risberg/Associated Press)

Jefferies slashes target on Apple, warns of delayed iPhone launch Add to ...

Inside the Market's roundup of some of today's key analyst actions

Analysts don’t deserve a lot of applause for their predictive powers when it comes to Apple Inc. of late. The stock started its steep descent last September. Yet, the average price target didn’t take a dive until mid-January, according to Bloomberg data. Up until that time, the Street was sticking to its insistence that big gains were to come.

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Sentiment is changing swiftly now, however, with another well-known analyst ratcheting down his target on the stock today.

Jefferies analyst Peter Misek cut his target to $420 (U.S.) from $500, warning of possible delays in the next-generation iPhone, the 5S. He predicts there’s a 25 per cent chance Apple will miss its revenue forecast for the current quarter.

“Our checks indicate Apple’s suppliers are having problems with the new casing colours leading to a push out from June to July-September after Apple hoped to pull forward the update,” Mr. Misek wrote to clients.

Mr. Misek also warned that the launch of Samsung’s Galaxy S4 could further erode Apple’s market position in smartphones.

“Historically, when handset makers fall out of favour (e.g., the RAZR, BBRY, HTC), they fall faster/further than expected,” he said.

He also doesn’t think Apple’s iTV product will launch before 2014.

Apple shares at midday were down 1.5 per cent. The IDC reported today that Apple is losing market share to tablets running Google Inc.’s Android software. And Mr. Misek’s note didn’t provide a lot of reason to buy the stock, either.

But analysts’ poor guidance to investors over the past several months has left many stock market players wondering why they should care.

At the end of last September, when the stock was trading near $707, the average analyst target was $776 and about 86 per cent of them were recommending Apple as a buy. By the time the stock dove to $550 in mid-November, the average target had barely budged, at $773.

A bevy of target cuts were announced after the company’s fourth-quarter earnings in mid-January. Today, the average price target is $611.04.

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Cargojet Inc.’s overnight volumes appear to have turned the corner, and it may well benefit from “very large potential upside,” Canaccord Genuity analyst Chris Bowes said.

“We believe the volume increases are sustainable and mark the beginning of a recovery, with margin improvements likely to follow,” he wrote in a research note. “As we have noted in the past, we view CJT as largely a fixed-cost operator, which has significant leverage to higher volumes.”

Canada Post, which owns most of Purolator, the largest overnight delivery service in Canada, has begun the process to put out to tender its overnight air cargo requirements, Mr. Bowes noted. “We believe CJT has roughly a 50-50 chance to be awarded this business, which would more than double the company's freight volumes.”

Target: Mr. Bowes raised his rating to “buy” from “hold” and his target price to $10.75 from $8.50. The average 12-month target among analsyts is $10.38, according to Bloomberg data.

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Canacol Energy Ltd. stock “has likely bottomed,” said CIBC World Markets analyst Ian Macqueen.

“With the addition of the Esperanza gas field, recent success on Block 23 and a lesser dependence on declining Rancho Hermoso production, we see more upside than downside at current prices,” he said.

Target: Mr. Macqueen raised his rating on the stock from “sector performer” to “sector outperformer” and cut his price target from $4.50 to $4. The average Street target is $6.69.

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Jean Coutu Group faces increasing headwinds in Alberta that could put a lid on earnings growth, said Desjardins Securities analyst Keith Howlett.

However, the drugstore chain still has many strengths, he pointed out in a research note. “PJC has an exceptionally strong balance sheet and, as a successful franchisor, generates high free cash flow. Its franchised store network continues to gain market share in the province of Québec. We expect a dividend increase in April, when fourth-quarter results are announced.”

Target: Mr. Howlett reduced his rating to “hold” from “buy” and has a target price of $16. The average analyst target is $15.67.

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Premier Gold Mines Ltd. should see several “meaningful” catalysts this year that could lead to a spike in its share price, said RBC Dominion Securities analyst Sam Crittenden. These include drilling results at projects in Red Lake, Ont., and in Nevada, and the release of a preliminary economic assessment of its mineral prospects along the Trans-Canada highway.

“While exposed to broader market factors, with a reasonable valuation, $155-million in cash and equivalents, and an experienced management team, we believe Premier Gold is uniquely positioned among junior gold stocks,” he said.

Target: Mr. Crittenden rates the stock as “outperform” with a price target of $5.

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For more analyst actions, breaking investing news and analysis, follow Darcy Keith on Twitter at @eyeonequities

Follow us on Twitter: @eyeonequities, @SVerma__

 
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