MANU FERNANDEZ
Canaccord Genuity's latest store checks suggest that the sluggish iPhone sales that made for a rare earnings miss in Apple Inc.'s latest quarter won't last long.
Its checks last month, in fact, point to record fiscal first-quarter sales for the iPhone, bouncing back from the weakness it saw in the final three months of its last fiscal year, which ended Sept. 24.
"Our monthly channel checks indicated very strong sales trends for the new iPhone 4S and lower priced legacy iPhone 4 and 3GS models," Canaccord analyst T. Michael Walkley said in a research note today. The iPhone 4S was the top selling model at AT&T, Sprint and Verizon, with the less expensive iPhone 4 a top three selling model at each of those carriers, he added
Apple relinquished its No. 1 smart phone market share to Samsung during the third quarter of calendar year 2011. But it still generated a remarkable 52 per cent share of estimated third-quarter handset industry operating profits among the top 8 original equipment manufacturers, according to Mr. Walkley's analysis.
This represents a 5 per cent increase over the third quarter of 2010, when Apple's share of industry operating profits was 47 per cent. Even more impressive is the fact that in 2007, Nokia had 67 per cent of operating profits while Apple had just 4 per cent. Nokia's share now? 4 per cent.
He raised his iPhone forecasts for December by 2 million to 29 million units, and increased his fiscal 2012 earnings per share estimate from $33.10 to $33.52.
Upside: Mr. Walkley raised his price target by $15 to $560 (U.S.) and reiterated his "buy" rating.
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In the wake of the company's latest quarterly earnings report, CIBC World Markets Inc. and Canaccord Genuity analysts aren't budging on their belief that Yellow Media Inc. shares are basically worthless. Both CIBC's Robert Bek and Canaccord's Aravinda Galappatthige reaffirmed their price targets of zero.
Yellow media reported third-quarter earnings before interest, taxes, depreciation and amortization of $166.0-million, down 14.1 per cent from a year ago, missing the consensus estimated of $176-million.
Mr. Galappatthige believes print declines will continue to deteriorate and more than offset the online growth that the company is betting will reinvigorate its sales.
He's also worried the company's bank credit facility will not be renewed when it comes due in February 2013 amid dwindling cash reserves.
"In our view, the key question for the company now is whether it can honour its obligations down the road if the bank facility is not renewed in February 2013. Our financial projections assume no renewal," Mr. Galappatthige wrote in a research note.
"We estimate that as at the end of fiscal 2013, YLO will have a cash balance of $76-million. Bond maturities in fiscal 2014 amount to $255-million, which means it will need to generate at least $200-million in free cash flow in fiscal 2014, by our estimates. This is too close for comfort, in our view."
Mr. Bek echoed that sentiment: "YLO faces structural issues made worse by a troubled capital structure, putting pressure on the underlying equity. Given the focus appears solely on protecting access to lenders, we do not foresee a situation where a positive equity outcome is likely."
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BCE Inc. will announce a 5 per cent hike in its dividend in February, predicts UBS analyst Phillip Huang. He continues to recommend investors buy stock in the telecom company, which Thursday reported better-than-expected earnings and raised its guidance going forward, thanks partly to more smart phone subscribers.
Upside: Mr. Huang raised his price target by $2 to $43.
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Raymond James Ltd. analyst Kenric S. Tyghe has upgraded Shoppers Drug Mart to "outperform," expecting good things to come for investors under the company's new leadership.
"Our decision to upgrade does not reflect expectations of a positive surprise in 3Q11 results, but rather our belief that the earnings power of a more tightly focused rewiring of the Shoppers' model under new CEO, Domenic Pilla, is not adequately reflected in either our estimates or current target multiples," he said. "We believe that this team under new leadership is rewiring the business for the irrational (but expecting the rational) and as such cost cuts will be deeper than the status quo requires and key strategic initiatives more narrowly focused."
Upside: Mr. Tyghe raised his price target by $4 to $48.
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Raymond James Ltd. analyst Justin Bouchard is upping his targets on Suncor Energy Inc. after the company beat the Street in reporting third-quarter earnings.
But he cautions results may not be so rosy going forward, and reiterated his "market perform" rating.
"We continue to have considerable concerns regarding the looming inflationary pressures that appear to be on the horizon for the oil sands industry. From our perspective, Suncor stands to be one of the hardest hit if and when these pressures begin to re-emerge. In this regards, we do see some negative headline risk for the company over the next 12 months as the company works towards providing a revised cost estimate for the Fort Hills mining project.
Upside: Mr. Bouchard raised his price target by $3 to $35.
Darcy Keith