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A Rogers Communications store in Toronto on June 3, 2012. (Michelle Siu For The Globe and Mail)
A Rogers Communications store in Toronto on June 3, 2012. (Michelle Siu For The Globe and Mail)

Merrill Lynch cuts target on Rogers on Verizon threat Add to ...

Inside the Market’s roundup of some of today’s key analyst actions.

Merrill Lynch analyst Glen Campbell upgraded Rogers Communications Inc. to a "buy" from "hold," but at the same time lowered his price target on the stock as he factored in the potential for Verizon Communications' entry into the Canadian wireless race.

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The upgrade reflected the more than 20 per cent fall in the stock price over the last three months, as well as improved discipline on setting wireless prices in the industry. Merrill Lynch also expects above-consensus results for Rogers financials this year and in 2014.

Merrill Lynch is now assuming in its models that new entrants – which includes Verizon – will take an 18 per cent share of the wireless market by 2025. That should see Rogers' average revenue per user (ARPU) drop to $52.50 from the current level of close to $60, it said.

Target: Mr. Campbell cut his price target to $45.50 (Canadian) from $48.75.

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Raymond James analyst Steve Hansen downgraded Bombardier Inc. to "market perform" from "outperform" because of the stock's nearly 30 per cent rise over the past three months, as well as the "incremental risk" associated with the further delay of the C Series first flight.

Bombardier said earlier this week it still requires a few more weeks to complete final testing of the C Series, the third official delay in recent months.

"Despite another small delay, we are fairly confident that Bombardier's C Series will successfully achieve first flight," Mr. Hansen said in a research note. "We are also cognizant that such an important milestone will likely serve as an important catalyst for the flagship program, and may ultimately spur additional aircraft orders. From our perspective, however, the trade-off is the mountain of risk still embedded in the aircraft's subsequent flight testing program which, by the company's own admission was previously already facing a relatively aggressive timeline as it advances toward entry-into-service."

"In this context, while there are certainly other potential catalysts that may help lift the company's shares higher (i.e., regional and business jet orders), we feel that the relative risk-reward proposition has been diminished based upon the strong price performance in recent months," he said.

Target: Mr. Hansen maintained a $5.50 (Canadian) price target.
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Desjardins Securities analyst Jamie Murray upgraded Precision Drilling Corp. to "buy" from "hold," recommending investors add to their positions as the company is "now firing on all cylinders with the renewed interest in its super series drilling rigs."

"While the stock’s valuation has increased in recent weeks, it is more consistent with early to mid-cycle multiples, and we note that our earnings estimates have upside potential if pricing power returns. In addition, Precision’s diverse asset base should participate in an expected North American drilling recovery," he said.

Target: Mr. Murray raised his price target to $12.75 (Canadian) from $10.50.

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

 
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