Monday's analyst upgrades and downgrades

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Inside the Market's roundup of some of today's key analyst actions. This file will be updated during the trading day.

Google Inc. makes headlines with futuristic products like Google Glass and driverless cars. Credit Suisse, however, believes that its Google Play store is the company's next big profit driver.

Analysts Stephen Ju, Yoni Yadgaran, Dean Prissman and Nick Hrynkiewicz write that "Google Play has grown over the last two years from essentially zero to a level equal to YouTube in size and should contribute about $4.4-billion (U.S.) in revenue this year."

Before Play, the analysts argue, the tech giant's strategy of giving away its Android operating system for free had yet to produce any revenue. As gamers shift their focus to smartphones and tablets, however, statistics from key early-adopter markets — specifically Japan — suggest the growth potential of the Play store (the online marketplace for Android apps and games) is sizeable.

With Google Play in mind, the analysts raised their target price to $742 (U.S.) from $735, based on adjustments to expected growth in Google's free cash flow. They continue to rate the stock "outperform."

The analyst consensus price target for Google over the next year is $661.03 (U.S.), according to Thomson Reuters.

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Canaccord Genuity Phil Skolnick upgraded Athabasca Oil Corp. to "buy" from "hold," believing the recent underperformance of its shares makes for "very attractive" risk-reward for investors right now.

Key to his recommendation is the company's plan to sell a 40 per cent stake in the Dover oil-sands venture for $1.3-billion (Canadian) to partner PetroChina through a put option.

Athabasca Oil has underperformed peers by about 12 per cent since early May and Mr. Skolnick believes this could be partly explained by concerns that the company may not receive the put proceeds. Doubts grew whether the deal will get done after reports emerged in mid-May stating that PetroChina's overseas operations chief is under investigation by Chinese officials for corruption charges. The reports suggested new management believed that the firm may have been overly aggressive on making purchases of high-cost unconventional energy assets, like oil sands and shale gas in Canada.

However, Mr. Skolnick noted that Bloomberg News reported on Saturday that PetroChina is committed to completing its purchase of the 60 per cent stake it doesn't already own in the Dover oil sands project, quoting an e-mail from the incoming director for China National Petroleum's Canadian unit.

"Assuming no put proceeds, we see downside risk at about 5 per cent at this point. But the upside/outperformance potential of receiving the put proceeds at about 40 per cent. Coincidentally, this is roughly in line with the upside potential that our $9.75 (Canadian) target price provides," Mr. Skolnick said.

The analyst consensus price target for Athabasca Oil over the next year is $9.88.

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Raymond James is out today with a refreshed analysis of the precious metals sector, resulting in two downgrades of Canadian gold companies and several adjustments to price targets.

For the commodity gold itself, Raymond James analysts led by Adam Low raised their price forecasts modestly, expecting prices to average $1,350 (U.S.) per ounce between now and 2018 (up from $1,300). Their price assumption from 2019 onwards was also revised $50 higher to $1,250.

For silver, they expect prices to trade in a range between $18.50 (U.S.) per ounce to $22 this year.

The analysts noted that sentiment towards precious metal equities has been trending positively so far this year, although volatility levels have been low. "Gold continues to exemplify a metal in consolidation phase with volatility diminishing to 2001 levels. Investor attraction to names with operational stability, reducing risk profiles and flexible balance sheets are outperforming their peers," they said in a research note.

The two downgrades were linked entirely to recent share price appreciation. Semafo Inc.'s rating was lowered to "market perform" from "outperform" but the price target was raised to $5 (Canadian) from $4.75. Sandstorm Gold Ltd. went to "market perform" from "outperform" with the price target going up to $8 (Canadian) from $7.

Other notable price target hikes included Agnico Eagle Mines Ltd. (to $44 U.S. from $39); Detour Gold Corp. (to $18 Canadian from $16); Goldcorp Inc., (to $31 U.S. from $27); and Royal Gold Inc. (to $93 U.S. from $83).

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Three analysts today initiated coverage on Kinaxis Inc., with all of them recommending investors buy shares in the TSX-listed provider of cloud-based subscription software.

"We believe that Kinaxis is very-well positioned to benefit from increasing supply chain volatility and declining aversion to the use of cloud based Supply Chain Management (SCM) software tools," commented Canaccord Genuity analyst Robert Young. "We believe Kinaxis is at the start of a long period of predictable, consistent 20-per-cent-plus revenue growth alongside EBITDA margins north of 20 per cent. We see numerous attractive features including strong products, sticky blue chip customers and a large market dominated by old software."

Mr. Young started coverage of the stock with a "buy" rating and $19 (Canadian) price target. Elsewhere, RBC Dominion Securities gave it an "outperform" rating with $19 target and BMO Nesbitt Burns an "outperform" rating and $18 target.

"Based on our discussions with customers and industry participants, we believe Kinaxis has established itself as a leader in a large and growing market - as evidenced by its impressive customer list and growth rate, and supported by its strong ranking in Gartner's most recent report on its space," said BMO analyst Thanos Moschopoulos. "We believe Kinaxis has a strong and defensible competitive advantage with its technology and expect that this will allow it to continue to drive a robust and sustained level of growth."

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Clarus Securities Inc. analyst Jamie Spratt sees a turnaround story in Kirkland Lake Gold Inc.

Mr. Spratt explains says the miner is approaching an operational inflection point at its Kirkland Lake Mine complex. He expects that increasing grades, higher production and declining costs will see a transition to being free cash flow neutral this year, and predicts an increase in production of 50 per cent by fiscal year 2017.

Further bright spots include management with a solid track record, a credible growth plan and an attractive valuation relative to its peers.

Mr. Spratt initiated coverage of Kirkland Lake with a "speculative buy" rating and $5.75 target price. The analyst consensus price target over the next year is $4.07, according to Thomson Reuters.

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In other analyst actions:

Desjardins Securities hiked its price target on DragonWave to $2.20 (Canadian) from $1.70 and maintained a "hold" rating.

Raymond James raised its price target on Paramount Resources to $82.50 (Canadian) from $69 and maintained a "strong buy" rating.

AltaCorp raised its price target on Air Canada to $15 (Canadian) from $13 and maintained an "outperform" rating.

UBS raised its price target on Magna International to $116 (U.S.) from $101 and maintained a "neutral" rating.

National Bank Financial initiated coverage on Shawcor with an "outperform" rating and $70 (Canadian) price target.

Canaccord Genuity initiated coverage on Dorel Industries with a "buy" rating and $50 (Canadian) price target.

RBC Dominion Securities raised its price target on DHX Media to $7.50 (Canadian) from $6.50 and maintained an "outperform."

ActionPac raised its price target on Orbite Aluminae to 70 cents (Canadian) from 50 cents and maintained a "speculative buy" recommendation.

Barclays upgraded Apple to "overweight" from "equalweight" and raised its price target to $110 (U.S.) from $95.

Barclays upgraded Lear to "overweight" from "equalweight" and raised its price target to $113 (U.S.) from $93. UBS also raised its price target to $99 from $85.

JPMorgan downgraded Wells Fargo to "neutral" from "overweight" and cut its price target to $52 (U.S.) from $54.50.

Evercore Partners upgraded Nasdaq OMX Group to "overweight" from "equal weight" with a price target of $46 (U.S.).

UBS raised its price target on Ford to $22 (U.S.) from $18 and maintained a "buy" rating.

UBS raised its price target on General Motors to $54 (U.S.) from $49 and maintained a "buy" rating.

UBS raised its price target on Colgate-Palmolive to $79 (U.S.) from $73 and maintained a "buy" rating.