These are some of the key analyst actions on Bay Street today.
Research In Motion Ltd.
Things aren’t getting much better for Research In Motion as the fall season unofficially gets underway. Its Canadian-listed shares inched to a fresh nine-year low today and Canaccord Genuity analyst T. Michael Walkley -- who’s been particularly bearish on the stock for some time now -- released yet another troubling research report.
Canaccord’s latest channel checks for August showed continued weak global selling trends for BlackBerry 7 smartphones. “While our checks indicated pockets of solid sales for RIM’s low-end Curve 9550 and 9320 in markets such as Indonesia and the Middle East, RIM’s higher-end Torch and Bold sales remain very weak,” he said.
Mr. Walkley assigns a high probability to RIM releasing its BlackBerry 10 smartphone as scheduled in the first quarter of next year. But he doesn’t see it doing much in terms of turning around the struggling business.
“In fact, we believe RIM has lost too much smartphone market share to Apple and Android and will mightily struggle to win back consumers even if BlackBerry 10 smartphones are very competitive and compelling products,” he wrote.
“With increased global smartphone competition and our belief there is a very low probability the market will support RIM’s new BB10 ecosystem, we believe RIM will ultimately need to sell the company or dramatically change its business model.”
Downside: Mr. Walkley maintained a “hold” rating and an $8 (U.S.) price target, which matches the median analyst price target on the Street, according to Thomson/First Call.
National Bank of Canada
Even though National Bank of Canada beat the Street consensus in reporting quarterly earnings per share last week of $1.98, CIBC World Markets analyst Robert Sedran isn’t impressed. He downgraded the stock to “sector underperformer” from “sector performer,” contending that the “quality of the beat” was weak.
Specifically, lending net interest income fell well short of expectations, as the company continued to chase greater quantity of loans at the expense of margins, he said. Net interest margins were down 20 basis points from last year, a trend he found “troubling.”
He’s also worried about the impact of the election campaign in Quebec, a province where the bank has considerable exposure. “While we suspect that fears may be overblown as they relate to the bank, they may remain an overhang on the shares if no clear mandate emerges from the vote,” Mr. Sedran said.
Downside: Mr. Sedran cut his price target by $3 to $78.
Medicis Pharmaceutical Corp.
While believing there is potential for Medicis to receive a higher bid than the $44-per-share cash offer from Valeant Pharmaceuticals International Inc., RBC Dominion Securities analyst Shibani Malhotra is advising investors not to bet on it. “With the stock now reflecting Valeant’s offer, we no longer believe MRX shares represent a favourable risk/reward, leaving us neutral on the stock,” she said.
Upside: Ms. Malhotra downgraded Medicis to “sector perform” from “outperform,” and raised her price target by $7 to $44 (U.S.)
Fairborne Energy Inc.
While Fairborne Energy has very little debt and there’s significant potential to boost resources at its Harlech-area operations in Alberta, Raymond James analyst Kristopher Zack believes the stock will perform in-line with the market until it can demonstrate success with further well results.
Downside: Mr. Zack downgraded Fairborne to “market perform” from “outperform” and cut his price target to $1.65 from $2.50.
Bonterra Energy Corp.
Bonterra Energy, a high dividend-paying exploration and production company focused in the Pembina Cardium play in Alberta, “represents a strong resource oil yield investment with solid asset exposure, capital efficiencies and returns to drive dividend growth,” said National Bank Financial analyst Dan Payne. But he sees “near-term headwinds,” commenting that it may need more funding or financing options to sustain production and dividend levels.
Upside: Mr. Payne initiated coverage with a “sector perform” rating and $44 price target.
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