Inside the Market's roundup of some of today's key analyst actions
Buying shares now in Research In Motion Ltd. isn’t a wise investment, warns UBS Securities Canada Inc. analyst Phillip Huang.
While surprised by the swift turnaround in market sentiment since late September, he notes there’s a disturbing historical precedent for a stock rally in a hand-held computer maker that ended in tears: Palm Inc.
Palm saw its shares skyrocket from $3 to about $18 as it struggled to regain significance in the mobile computer market. But the stock fell back to $3.76 in about 15 months before it was acquired by Hewlett-Packard in 2010 for a mere $5.70 per share.
“Interestingly, RIM, Nokia and HTC have all rebounded strongly off their recent lows with the market hopeful that as many as four platforms and ecosystems (iOS, Android, Windows, BB10) can succeed. We remain doubtful,” Mr. Huang said in a research note.
He notes the recent rebound in RIM’s stock price comes amid no change in fundamentals, given that the BlackBerry 10 device won’t hit store shelves until Jan. 30.
“With the shares now well above the 200-day moving average and trending towards the upper end of our sum-of-the-parts range, we find the risk increasingly skewed to the downside,” Mr. Huang added. “The range of outcomes is wide, and we can’t recommend shares on a low probability of success for BlackBerry 10.”
He conceded, however, that until the launch of the BlackBerry 10, “there are likely limited hurdles” to stop the stock inching higher.
Downside: Mr. Huang maintained a $9.50 (U.S.) stock price and “neutral” rating.
Apple Inc. shares at midday had recovered from an early morning dip to near the $500 (U.S.) level, last trading up about 1 per cent.
The company said early today that it sold over 2 million units of its new iPhone 5 in its first weekend on sale in China, a record for the company’s smartphone.
But the Street is being very conservative in celebrating the milestone.
Citigroup downgraded Apple to "neutral" from "buy," saying that recent checks showed "near-term supply-chain order cuts that bring into question the strength of iPhone 5." It slashed its price target by $100 to $575.
Canaccord Genuity also this morning cut its price target, citing softer sales expectations in international markets, especially in Europe, for the iPhone and iPad. Canaccord maintained a "buy" rating though as it reduced its price target by $25 to $750.
And Abhey Lamba of Mizuho Securities USA cut his price target to $600 from $750, while reiterating a "buy" rating, citing "downside risks" that iPhone shipments for the March quarter won't meet current estimates.
Many are also taking Apple’s latest sales figures in China with a grain of salt. That’s because it did not release comparable three-day sales figures for the iPhone 4S, the 5’s predecessor, which went on sale in January.
Investors in North American Palladium Ltd. should be wary, after its chief financial officer and chief executive officer resigned within months of each other, said CIBC World Markets analyst Leon Esterhuizen.
“Another change in management suggests to us that the risk of an operational disappointment at the company is mounting,” he wrote in a research note. “As a result, we have adjusted our model to account for this, forecasting lowering production and higher costs over forthcoming years.”
Downside: Mr. Esterhuizen lowered his target price to $1.70 from $2.40 and his rating to “sector perform” from “sector outperform.”
Equal Energy Ltd.’s decision to sell its entire Canadian asset base augurs well for the company, said Desjardins Securities analyst Tim Murray.
“We believe management has done a very good job of maximizing value from the asset sales and, in turn, reducing debt,” Mr. Murray said. “The company has gone from one of the most levered small caps to one of the least.”
Upside: Mr. Murray raised his target price to $4.25 from $4 and rates the stock “buy.”
Encana Corp.’s agreement to sell a nearly 50 per cent stake in its liquids-rich Duvernay property in Alberta to a unit of PetroChina is a “touchdown” for the company, said RBC Dominion Securities analyst Greg Pardy.
“We look upon Encana‘s conversion of a $2.18-billion Duvernay joint venture with PetroChina as a positive step in its journey toward achieving a more balanced production base,” said Mr. Pardy. “In our view, the $9,800/acre receive by Encana constitutes a good price — and one slightly ahead of Street expectations.”
Upside: Mr. Pardy raised his price target by $1 to $27 (U.S.) and maintained a “sector perform-average risk” rating.
Read More: PetroChina, Encana strike natural gas pact.
For more analyst actions, breaking investing news and analysis, follow Darcy Keith on Twitter at @eyeonequities