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Zynga raised money in multiple rounds at ever-rising valuations, allowing insiders and other backers to sell along the way. (Mark Lennihan/Associated Press/Mark Lennihan/Associated Press)
Zynga raised money in multiple rounds at ever-rising valuations, allowing insiders and other backers to sell along the way. (Mark Lennihan/Associated Press/Mark Lennihan/Associated Press)

Eye on Equities

BMO predicts Zynga will bounce back to IPO price Add to ...

BMO Nesbitt Burns Inc. analyst Edward Williams sees upside ahead for shares in online games maker Zynga Inc. , but not much. He initiated coverage of the stock today with a “market perform” rating and $10 (U.S.) price target - matching the price it premiered at in its initial public offering late last year.

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“We believe Zynga will continue to see strong growth as the dominant social games player in the industry and is poised to further grow following its investments in the mobile category,” Forbes.com quotes Mr. Williams as saying in a research note. “However, we believe that the company’s current valuation fairly reflects the underlying growth potential.”

He notes that recent games on Facebook, Zynga’s main platform, have not performed as well as other previous titles, and that points toward slower growth. But, “as the premiere game developer on the largest social network, the company enjoys significant advantages over its rivals that it will hold for the foreseeable future.”

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J.P. Morgan analyst Rod Hall has upgraded Cisco Systems Inc. to “overweight” from “neutral,” commenting that the company “represents a relatively safe haven for communications and equipment investors.” He believes Cisco encountered a “perfect storm” of multiple small issues in its 2011 fiscal year that pressured margins. Many of these small problems have now been resolved.

Upside: Mr. Hall raised his price target by $2 to $21 (U.S.).

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5N Plus Inc.'s biggest customer, First Solar Inc. , has not been immune to the supply and demand imbalance that plagued the solar industry for most of 2011. But the solar module manufacturer expects to remain solidly profitable even as it transitions to non-subsidized markets, and that bodes well for 5N Plus, said M Partners analyst John Safrance. “We believe the entire industry would declare bankruptcy before First Solar,” he commented.

Upside: M Partners reiterated its “buy” recommendation and $9.75 (Canadian) price target.

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Canaccord Genuity analyst John Gerdes has downgraded Petroleum Development Corp. to “hold” after the company announced lower-than-anticipated capital spending plans for 2012 and forecast less oil and natural gas liquids production as a percentage of overall output. “While we applaud PDC’s effort to narrow its focus and enhance liquidity, we believe the shares are near fair value,” said Mr. Gerdes.

Downside: Mr. Gerdes cut his price target by $2 to $39 (U.S.).

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North American Energy Partners Inc. said it will resume operations on its overburden removal contract at the Horizon oil sands mine in early January, a project that had been on hold since last May. CIBC World Markets Inc. analyst Jeff Fetterly expects a renegotiated contract will include an upfront payment to reflect a portion of the lost margins and improved fiscal terms. “While the Horizon resolution is a near-term positive for NOA, we believe project execution and earnings visibility will be the key catalysts for a continued recovery in NOA's share price,” he said.

Upside: Mr. Fetterly bumped up his price target by 50 cents to $9 (Canadian) and reiterated a “sector performer” rating.

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The government of Panama has approved Inmet Mining Corp.’s Environmental and Social Impact Assessment for the Cobre Panama copper mine, a key step for project permitting. “We believe the ESIA approval will add further impetus to partnership and financing discussions,” commented UBS analyst Matt Murphy, who believes Inmet will seek an operating partner to take a 40 per cent stake.

Upside: Mr. Murphy reiterated a “buy” rating and a price target of $70.

 
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