CIBC World Markets Inc. is getting more bullish on the long-term outlook for potash prices, believing that supplies will be constrained by the rising costs of building new capacity.
Analyst Jacob Bout raised his forecast for average potash prices over the long haul to $600 (U.S.) per tonne. While that’s up $50 from his previous outlook, it’s still slightly below the price where he believes most new global projects make sense.
Investment plans for the industry have surged in recent years, rising from $2-billion in planned projects in 2009 to $13-billion today. There are 40 development projects being considered today, compared to just 15 three years ago.
“We believe most greenfield potash projects will not be developed, barring a mining or processing breakthrough,” Mr. Bout said in a research note.
The biggest risk for the industry, he suggests, is demand. “The number one lesson learned in 2009 is that farmers are price-sensitive, and cut back on potash application the most out of all the nutrients” when prices for the fertilizer soar.
His revised outlook for the industry resulted in one rating upgrade and a handful of price target hikes.
Mosaic Co. is now rated as a “sector outperformer,” with his price target going to $88 from $82 (U.S.). He raised his price target on Agrium Inc. by $3 to $113, and on Potash Corp. of Saskatchewan Inc. by $3 to $68.
Saputo Inc. “is arguably among the best-managed food processing names in its industry, with industry-leading performance metrics,” said RBC Dominion Securities Inc. analyst Irene Nattel. But its stock is sharply lower since early August when the company’s quarterly results revealed weakness in U.S. dairy segment margins. “Our assessment is that the downdraft is not justified,” she said.
Upside: Ms. Nattel upgraded Saputo to “outperform” from “sector perform” and maintained a $49 price target.
Nevada Copper Corp. is now planning to develop its Pumpkin Hollow copper project as an open pit and underground mine feeding a single mill, with production targeted as early as 2015. “This new scenario potentially simplifies project development while also potentially improving project economics by starting a large 60,000 ton-per-day operation by as much as two years sooner than previously contemplated, and reducing overall capital costs,” commented Canaccord Genuity analyst Wendell Zerb.
Upside: Mr. Zerb raised his price target by 60 cents to $7.90 and maintained a “speculative buy” rating.
Hardware systems often fail and the loss of key files and other content can be costly for consumers and businesses. Enter Carbonite Inc. . It has developed a low cost, cloud-based consumer and small business backup system for key files and charges $60 (U.S.) per year for the peace of mind. Canaccord Genuity analyst Richard Davis commented the firm has executed well on expanding its subscriber base and has already marginalized “several ostensibly large and scary competitors from the market.”
Upside: Mr. Davis initiated coverage with a “buy” rating and $16 price target.
Trinidad Drilling Ltd. shares have plunged about 40 per cent from late July, signalling that equity markets are concerned about the future of oil and gas drilling in North America. “However, our analysis tell us that field economics remain highly attractive, and that the balance of the news flow from drillers in general, and Trinidad in particular, will be skewed to the positive,” commented Raymond James Ltd. analyst Andrew Bradford.
Upside: Mr. Bradford reiterated his “strong buy” rating and $12.50 price target.