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.
Netflix Inc. shares have more than doubled so far this year, and according to Bernstein Research, it’s time for investors to take profits.
Bernstein downgraded the streaming TV service today to “underperform” from “market perform,” commenting that the stock’s rally assumes nearly unattainable growth rates.
“The stock’s current valuation reflects unrealistic expectations across all major economic and strategic levers of the business,” analysts Carlos Kirjner and Ram Parameswaran said in a research note. “We think the limits imposed by the actual size of Netflix’s truly addressable domestic market, growing competition, and diminishing returns on incremental content investment will become clear in 2014.”
If the current stock price is to be justified, Netlix should have at least 50 million streaming subscribers in the U.S. within a year, they said. But the analysts think just 43 million subscribers is likely.
Target: Bernstein raised its price target to $180 (U.S.) from $125. The median target among analysts is $220, according to Thomson First Call.
Canaccord Genuity analyst David Tyerman upgraded New Flyer Industries Inc. to “buy” from “hold.” He believes that the bus maker is positioned for strong earnings growth thanks to its acquisition this month of North American Bus Industries, as well as a solid North American heavy duty city bus market.
“This, plus continued low capex requirements, should generate good free cash, which should easily support the company’s attractive dividend,” said Mr. Tyerman.
Target: Mr. Tyerman raised his price target to $11.25 from $10.25. The average analyst target is $11.18.
An investor day held by Freeport-McMoRan Copper & Gold Inc. to educate the financial community about its oil assets “verged on overkill,” said BMO Nesbitt Burns analyst Tony Robson.
“An impressive list of copper expansions and Gulf of Mexico upside was obscured by the detail,” Mr. Robson said as he trimmed his earnings per share forecasts for the company by 2 per cent for this year, and 4 per cent for next year, following the presentation.
He notes that while its Grasberg open pit mine in Indonesia has resumed operations, the company lost about 115 million pounds of copper and 115,000 ounces of gold to date while it was shut. The underground operation continues to be suspected, losing 1 million pounds of copper per day.
And while the company is trying to focus investors’ attention on the energy assets, the recent acquisition of oil and gas assets has significantly increased debt, and near-term ability to pay this off is limited by high capital expenditures for copper and oil operations.
Target: Mr. Robson rates the company as “market perform” with a price target of $30 (U.S.). The median price target is $38.
CIBC World Markets analyst Ian Macqueen has initiated coverage on Petroamerica Oil Corp. with a "sector outperformer" rating, believing shares in the junior producer operating in Colombia are cheap based on cash flow and its expected production and reserves growth this year.
He notes that Petroamerica is trading at 62 per cent of his net asset value estimate, and 2.4 times his estimated 2014 cash flow. "It showed good results in 2012 with the development of the Las Maracas (oil block), but will need additional appraisal and exploration success to grow reserves and production," he noted.
Target: Mr. Macqueen set a price target of 40 cents. The median price target is 50 cents.
Canaccord Genuity analyst Rahul Paul has reiterated a "buy" rating on B2Gold Corp., even though a tailings line pipe leak at its Masbate processing plant in the Philippines forced a 15-day production halt.
"Despite the disruption to production in the second quarter of this year, the shortfall is expected to be made up in the second half of this year due to a modification of mine sequencing that should facilitate the processing of additional material from the Colorado pit (better recovered grades) - a net neutral impact on our forecasts," he said.
The company remains one of Canaccord's top picks in the gold sector because of its strong balance sheet, fully funded production growth plans, and relatively low permitting, financing and new mine development risks.
Target: Mr. Paul has a $5 price target. The median price target is $3.92.
For more analyst actions, breaking investing news and analysis, follow Darcy Keith on Twitter at @ eyeonequities