Thursday'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.

Credit Suisse downgraded National Bank of Canada stock as a result of recent share price gains and a resulting high valuation.

Over the past three weeks, National Bank shares have appreciated by about 7 per cent, outperforming its peers by a wide margin. The stock has also outperformed its peers year to date with a 21-per-cent increase, compared to 16 per cent for the group.

"We believe the recent share price rally in NA fully reflects its strong third-quarter earnings, which were driven by very strong wholesale and wealth and solid retail," Credit Suisse analyst Kevin Choquette said.

As a result, National Bank is now trading at a price-to-earnings ratio that is 94 per cent as high as the average for the bank group, Mr. Choquette said. "National Bank's relative valuation has reached this level only five times in the past 10 years and we believe the stock will face resistance at the current level."

He downgraded the stock to "underperform" from "neutral" and maintained a $55 (Canadian) price target.

The analyst consensus price target over the next year is $53.44, according to Thomson Reuters data.

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Carfinco Financial Group Inc. is showing considerable strength in both its Canadian and U.S. operations, Industrial Alliance Securities analyst Dylan Steuart said. He upgraded the stock to "strong buy" from "buy" and maintained an $11 (Canadian) price target.

On Wednesday, the auto lender announced a cash dividend and provided performance data for the month of August, showing that loan balances grew at an annualized rate of 21.8 per cent, the strongest growth since October 2012.

"Carfinco remains well positioned in a very high margin business, while paying a very sustainable dividend yield of 6.3 per cent," Mr. Steuart said. "Continued loan growth momentum will allow management to leverage increased infrastructure spend in Canada and the U.S. and help to improve bottom line margins overall."

The analyst consensus price target for Carfinco Financial Group over the next year is $12.

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Dollarama Inc.'s quarterly results this week are evidence that consumer response to the store name remains strong, and that slower same-store sales growth in the two preceding quarters was largely weather-related, commented Desjardins Securities analyst Keith Howlett.

"The dollar store segment is consolidating into the hands of the strongest players, with Dollarama and Dollar Tree gaining market share," he added.

The company posted fiscal second-quarter earnings per share of $1.03 (Canadian), in line with consensus and up from 82 cents last year. The company also announced plans for a two-for-one stock split.

Mr. Howlett reiterated a "buy" rating and $99 (Canadian) price target. The analyst consensus price target for Dollarama over the next year is $100.87.

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Desjardins Securities initiated coverage on Mandalay Resources Corp. with a "top pick" rating and $1.50 (Canadian) price target.

Mandalay Resources currently operates three mines: the flagship Cerro Bayo underground silver-gold mine in southern Chile, the gold-antimony Costerfield underground mine in Victoria State, Australia, and the Björkdal gold mine in Sweden, which was acquired from Elgin Mining Inc. this week.

Desjardins analyst Michael Parkin commented, "In our opinion, Mandalay is deserving of a higher price-to-cash-flow multiple given the excellent low-cost production growth potential, history of paying a good sustainable annual dividend (6 per cent of gross revenue, introduced in 2012), secure balance sheet, assets located in low-risk jurisdictions with favourable mining policy, and management's strong track record and history of making accretive acquisitions."

"We believe Mandalay shares have the potential to trade more in line with the intermediate producer peer group average on a P/CF basis, which is currently at a market cap average of 9.9x our 2015 estimates. Currently, Mandalay is trading at 0.90x our NAV (net asset value) on a cash-adjusted basis, and 5.3x and 3.9x our 2014 and 2015 cash flow per share estimates, respectively. We expect Mandalay's reserve update in the first quarter of 2015 to prove positive for the mine lives of the various assets, which could result in an increase to our NAV; thus, at current share price levels, it could be trading at a discount to the P/NAV peer group average," he added.

The analyst consensus price target for Mandalay Resources over the next year is $1.32.

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Northern Blizzard Resources Inc., which recently completed an initial public offering, provides investors with exposure to a unique heavy oil company with above-average forecast production growth potential from projects with minimal risk, said TD Securities analyst Aaron Bilkoski.

"Moreover, investors purchasing shares today benefit from previously sunk capital that is likely to result in material production additions within the next year," he added.

Mr. Bilkoski thinks that over the medium term, cash savings resulting from investor participation in the company's dividend reinvestment plan, combined with its flexible balance sheet, will provide a source of financing to accelerate growth beyond his current forecasts.

He initiated coverage with a "hold" rating and $21.50 (Canadian) price target - which reflects his shorter-term view on the company for the next 12 months.

Elsewhere, RBC Dominion Securities initiated coverage on Northern Blizzard Resources with a "sector perform" rating and $21 (Canadian) price target.

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In other analyst actions:

RBC Dominion Securities upgraded JDS Uniphase to "outperform" from "sector perform" with a price target of $18 (U.S.).

Canaccord Genuity initiated coverage on Twitter with a "buy" rating and $62 (U.S.) price target.

Deutsche Bank initiated coverage on CME Group with a "buy" rating and $85 (U.S.) price target.