Meg Energy becomes Canaccord's favourite oil sands stock

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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.

Canaccord Genuity analyst Phil Skolnick has upgraded Meg Energy Corp. to "buy" from "hold" and has chosen the producer as his favourite heavy oil stock.

Oil sands companies are counting on the controversial Keystone XL pipeline to ship their crude to U.S. markets. But the controversial project has been caught up in a U.S. debate, and its approval is not assured, leaving a glut of crude – and lower prices - in Western Canada.

However, Meg Energy plans to move its oil to U.S. refineries by rail car and barges and has little at stake in the debate over the Keystone XL pipeline, said Mr. Skolnick, who expects higher-than-expected production.

"We believe the company will in the near-term be in a sweet spot where it benefits from both netback improvements and production growth," he said.

He sees cash flow per share rising about 188 per cent year over year in 2014. He also raised his target price to reflect expectations the stock will trade at 1.25 times net asset value.

"The premium to [net asset value] reflects the company's high quality assets, excellent operational execution, and direct exposure to the shift change in heavy oil fundamentals given its rail, barge, and Flanagan South arrangements," Mr. Skolnick wrote in a note to clients on Monday.

Meg Energy, whose shares are up by 12 per cent this year, is 19-per-cent owned by Warburg Pincus and 13-per-cent owned by China National Offshore Oil Corporation.

Target: Mr. Skolnick raised his share price target to $44 (Canadian) from $39. The average target price among analysts is $43.50, according to Bloomberg data.

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BMO Nesbitt Burns Tim Casey downgraded Glacier Media Inc. to "market perform" after coming to the conclusion that there's little reason for optimism when it comes to the print advertising market.

"We had been hopeful that low valuation metrics and diminished expectations provided a basis for a value- investment thesis," Mr. Casey said. "However, unrelenting secular challenges and prolonged weakness in the print advertising sector have overwhelmed our patience. In short, there appears to be no relief in sight to these challenges."

Target: Mr. Casey cut his price target to $1.75, which is also the average price target. He previously had a $2.50 target.

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Canaccord Genuity analyst Michael Graham has downgraded IAC/InteractiveCorp to "hold" from "buy," citing headwinds faced by the Internet company's search market, lower quarterly profit estimates and the stock's 31-per-cent rise since January.

"IAC is growing more slowly than it used to, leading to lower incremental operating leverage, and we are trimming our margin outlook in most segments for the balance of this year," wrote Mr. Graham, who is maintaining his share price target for the company, which is led by Barry Diller and operates more than 50 web brands, including Match.com and Vimeo.

Mr. Graham says IAC's pace of stock buybacks has slowed but the New-York-based company has "defensive qualities" with a valuation of a reasonable 11 times next year's earnings per share.

Target: Mr. Graham maintained a share price target of $56 (U.S.). The average target is $57.81.

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Citibank analyst Oliver Chen has initiated coverage on Lululemon Athletica Inc. with a "buy" rating, forecasting industry-leading earnings per share growth of over 25 per cent.

"LULU is still in the 'warm-up' phase of its growth trajectory as it still has significant North American growth potential, global expansion opportunities, e-commerce initiatives, as well as adjacent category growth such as in the Men's category, swim, and dance apparel for pre-teens," StreetInsider.com quoted Mr. Chen as saying.

Target: Mr. Chen set a $90 (U.S.) price target. The average target is $77.43.

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RBC Dominion Securities analyst Paul Quinn initiated coverage of U.S. forestry REIT Potlatch Corp. with a "sector perform" rating.

Washington-based Potlatch, which owns 1.4 million acres of timberland in Minnesota and three other states, harvests trees and makes paper products. Its lumber business is tied to the U.S. housing market, which has been on the upswing.

Other factors that could drive up log prices and profits are rising demand from China and a decline in the supply of timber from Canada, due to the ravages of the mountain pine beetle and smaller harvests in Eastern Canada, wrote Mr. Quinn in a note, who expects the company will begin raising its dividend beginning this year.

Potlatch's share price has had a wild ride in 2013, rising by 30 per cent between January and May, but falling by 25 per cent since then.

"We would view any material contraction in the share price due to a [slowdown] in the housing recovery as a buying opportunity," Mr. Quinn said.

Target: Mr. Quinn set a price target of $42 (U.S.).  The average target is $43.60.

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Other analyst actions today include:

Wells Fargo upgraded Baker Hughes Inc. to "outperform" from "market perform." It has a price target range of $61 (U.S.) to $63.

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