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Bay Street rolls on despite market storm (DEBORAH BAIC/DEBORAH BAIC/THE GLOBE AND MAIL)
Bay Street rolls on despite market storm (DEBORAH BAIC/DEBORAH BAIC/THE GLOBE AND MAIL)

Eye on Equities

An upgrade for Sierra Wireless, a downgrade for Jaguar Mining Add to ...

Raymond James analyst Steven Li is feeling more bullish on Sierra Wireless Inc. after hosting investor meetings with company management this week.

He upgraded the wireless technology firm to “outperform” from “market perform," believing the recent pullback presents “a compelling entry point.”

Sierra Wireless stock, down about 40 per cent from a year ago, has been volatile as the company posted a string of earnings reports that fell short of Street expectations.

“We believe this is about to change with more consistent results ahead,” said Mr. Li.

He argues that revenues and margins won’t fall further, and may rise, as the year progresses. Key to this will be new product launches, including some that promise higher margins. Meanwhile, purchase obligations with contract manufacturers increased to $124-million in the first quarter, up 46 per cent from the fourth quarter of last year, “a bullish sign in our view.” He also expects operating expenses to stay in a tight range.

Sierra’s own guidance for the second quarter calls for revenues of $160-million and earnings per share of 20 cents. When annualized, which assumes no growth, this represents at least 80 cents in earnings per share. He believes this provides “plenty of support” for his new price target of $11.25 (U.S.), up from $9.

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Real estate firm Mainstreet Equity Corp. reported better-than-expected fiscal second-quarter results, but even more importantly, its vacancy rate continued to improve into the current quarter, according to TD Securities analyst Jonathan Kelcher. Average vacancy dropped to 6.7 per cent as of May 1, a trend that’s key to driving earnings and net asset value growth. “We continue to believe that Mainstreet can generate above-average earnings and NAV growth as more of the portfolio becomes stabilized and as occupancy and rental rates continue to improve,” he said.

Upside: Mr. Kelcher raised his price target by $1 to $31 (Canadian) and maintained a “buy” rating.

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Brazilian gold producer Jaguar Mining Inc. has concluded a strategic review without any takeover bids materializing. Instead, it has launched an ambitious restructuring plan to curb the cash it’s burning through and turn around its struggling operations. National Bank Financial analyst Tara Hassan is wary. “While there are certainly improvements that could benefit operations, we view the outlined plan to be a difficult one to buy into given the aggressive targets, lack of detailed guidance and JAG’s long track record of missing targets,” she said.

Downside: Ms. Hassan downgraded the stock to “underperform” and slashed her price target to $1 (Canadian) from $2.60.

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Thompson Creek Metals Company Inc. has raised $411-million in additional funding that will mitigate any concerns around the financing of its Mt. Milligan copper-gold project in British Columbia, noted CIBC World Markets analyst Ian Parkinson. While it will result in equity dilution, he still thinks the current stock price allows investors to buy into “a steeply discounted stock compared to peers.”

Upside: Mr. Parkinson cut his price target by $3 to $10 (Canadian) and reiterated a “sector outperformer” rating.

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CI Financial Corp. is a well-managed fund company that did an excellent job controlling fixed expenses in its latest quarter, commented Paul Holden of CIBC World Markets. But the outlook for net sales, which dropped 12 per cent year-over-year in the first quarter, is weak, as investors pull money out of higher-fee equity funds. He also believes CI stock is expensive, given it’s trading at 15.5 times his 2013 earnings per share estimate.

Downside: Mr. Holden maintained a “sector underperformer” rating and trimmed his price target by 50 cents to $21.

Read More: CI Financial profits slide 5%

 
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