Wednesday'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.

Headwinds in the form of increased labour costs and a rising U.S. dollar have resulted in a downgrade for Dollarama Inc.

Industrial Alliance Securities analyst Neil Linsdell expects good news when Dollarama reports fiscal third-quarter results on Dec. 4., but says that looming challenges will limit upside potential over the medium term.

"Dollarama remains a favourite longer-term investment opportunity, although headwinds such labour cost increases will offset some of the efficiency improvements that the company has been putting into place," he says. "The company will also face headwinds from the appreciating U.S. dollar, and will experience cannibalization as it continues to open more stores and as Dollar Tree continues its Canadian expansion."

Mr. Linsdell downgraded Dollarama to "hold" from "buy" and maintains his $54.50 (Canadian) price target. The analyst consensus price target is $53.30, according to Thomson Reuters.

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Potash producer stocks may not benefit from a Russian mine closure as much as investors previously thought, with the initial share price gains being mostly wiped out in recent days.

Last week, Russia's OAO Uralkali, the world's largest potash producer, revealed the closure of its Solikamsk-2 mine as a result of flooding. Competing stocks surged on the possible tightening of an oversupplied market.

While the closure could be positive for potash prices, Merrill Lynch analyst Kevin McCarthy said he sees no reason to raise his earnings estimates or his target price on Agrium Inc.

In fact, he downgraded the stock to "underperform" from "neutral," on concerns for global demand. He has a price target on the stock of $99 (U.S.).

"Potash is oversupplied, and global demand growth could regress from a heady pace of about 11 per cent in 2014," Mr. McCarthy said.

Even if he's proven wrong on potash demand, investors would be better served buying into Mosaic Co. or Potash Corp. of Saskatchewan Inc. rather than Agrium, he said.

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Industrial Alliance Insurance and Financial Services Inc. has been upgraded by Credit Suisse analyst Kevin Choquette after underperforming its peers year-to-date.

"We are upgrading IAG to neutral from underperform based on significant share price underperformance versus both lifecos and banks, lower relative P/E multiple and positive upside leverage to higher interest rates and our recent trading call on lifecos versus banks," said Mr. Choquette in a research note.

He points out that the company's share price has declined 2 per cent year-to-date vs. gains of 11 per cent gain for Sun Life Financial, 6 per cent for Manulife Financial Corp. and 1 per cent for Great-West Lifeco.

In addition to the upgrade, Mr. Choquette raised his target price to $51 from $48. The analyst consensus price target is $49.82, according to Thomson Reuters.

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Raymond James analyst Ken Avalos downgraded InterRent Real Estate Investment Trust after a surge in unit price growth.

Mr. Avalos upgraded InterRent to "strong buy" in September as he believed that strong fundamentals, sharp underperformance and ensuing valuation gap set up an attractive 'catch up' trade. InterRent has since been the top performer in the Canadian REIT universe, returning 15 per cent versus the 4 per cent return in the Capped REIT Index.

"Our downgrade is wholly based on the REIT's strong relative performance over the last two months," he said in a note. "The sizable and unwarranted valuation gap has been shrunk and we think the strong short-term outperformance is set to moderate. Our long-term thesis remains unchanged and we continue to recommend that investors with a longer investment horizon accumulate shares at these levels."

Mr. Avalos lowered his rating on InterRent to "outperform" from "strong buy" and maintained his $6.50 (Canadian) target price. The analyst consensus price target is $6.65, according to Thomson Reuters.

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M Partners analyst Derek Macpherson downgraded Golden Queen Mining Co. to a "sell" rating from a "buy" after the company late Tuesday suggested estimated resources at its Soledad Mountain Project may have to be reduced.

As a part of the detailed mine planning required for production, the company brought in a new consultant, Mine Development Associates. It believes veins at the deposit may be narrower than previously modeled, potentially resulting in a reduction in resources and reserves.

"Taking a somewhat conservative approach to this modelling change with respect to our estimates we have left our grade estimates unchanged, reduced our resource size by 15 per cent and increased the stripping ratio by 15 per cent, which we believe reflects the company's expectations for reduced reserves and resources," Mr. Macpherson said in a note.

"We believe that the uncertainty surrounding the current resource elevates the risk profile of the company as the company needs to refinance $10-million in debt by January 2015," he added.

Mr. Macpherson reduced his price target to $1 (Canadian) from $1.45.

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Several analysts raised their price targets on Alimentation Couche-Tard, including Desjardins Securities hiking its target to $44 (Canadian) from $39 while maintaining a "buy" rating. But Barclays downgraded its rating to "equal weight" from "overweight" with a price target of $40.

Cormark Securities downgraded Fairfax Financial Holdings to "market perform" from "buy" with a price target of $575 (Canadian).

Cormark Securities upgraded Chesswood Group to "buy" from "market perform" with a price target of $16 (Canadian).

RBC Dominion Securities downgraded Louisiana-Pacific to "underperform" from "sector perform" with a price target of $13 (U.S.).

With files from Bloomberg