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People look at the new Apple iPad on the first day of iPad sales at Best Buy in Chicago, Saturday, April 3, 2010. Israel has lifted its ban on imports of the iPad, but official distributor says they are still a few weeks away from offering the device. (Paul Beaty/AP)
People look at the new Apple iPad on the first day of iPad sales at Best Buy in Chicago, Saturday, April 3, 2010. Israel has lifted its ban on imports of the iPad, but official distributor says they are still a few weeks away from offering the device. (Paul Beaty/AP)

Eye on Equities

Troubles seen for Best Buy as Amazon unveils tablet Add to ...

The expected launch Wednesday of Amazon.com Inc.’s tablet is unlikely to be celebrated at Best Buy Co. Inc. , an aggressive seller of competing devices.

Reportedly to be called the Kindle Fire, the Amazon tablet is anticipated to come with a highly competitive $249 (U.S.) price-tag. Compare that with the cheapest iPad being sold in the U.S., going for a relatively hefty $499.

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Piper Jaffray analyst Peter Keith is suggesting “very healthy demand” for the Amazon tablet, based on a proprietary survey of 420 online participants, according to Forbes. It found that 66 per cent of respondents would be interested in buying the Amazon tablet within 12 months of launch at a selling price of $249 per unit.

That may mean less demand for the other tablets being sold at Best Buy, which include products from Acer, Samsung and Apple.

“At this price, we believe this product could create yet another sales headwind for BBY over the coming year as a result of AMZN’s self-distribution model,” Mr. Keith was quoted by Forbes as saying in a research note. “While BBY may ultimately sell the AMZN tablet, we expect they will under-index in market share.”

Forrester Research predicts that Amazon may well sell as many as five million tablet computers in the fourth quarter, making the Internet retailer the top competitor to Apple Inc. .

Apple has sold almost 30 million iPads since launching its tablet in April, 2010.

Downside: Mr. Keith reiterated his “neutral” rating on Best Buy and $25 (U.S.) target.

Silver Standard Resources Inc. reported that its Pirquitas mill in Argentina was shut this week due to a gearbox failure, prompting the company to lower its 2011 silver production guidance by around one million ounces. The company also said that “cost guidance will be re-examined and reported with third-quarter results.”

Downside: UBS analyst Chris Lichtenheldt cut his price target by 25 cents to $33 (U.S.) but maintained a “buy” rating.

Student Transportation Inc. reported fiscal fourth-quarter earnings that were better than Raymond James Ltd. analyst Steve Hansen had expected and he still believes the stock, with its 9 per cent dividend yield, is attractive for income-oriented investors. “However, given current market conditions, the company's relatively rich valuation, and residual cost pressures still evident, we believe the capital appreciation in STB shares will remain constrained in the short to medium term,” he said.

Downside: Mr. Hansen trimmed his price target by 50 cents to $6.50 and reiterated his “market perform” rating.

Rainy River Resources Ltd. is likely to develop a larger operation at its namesake gold project in northern Ontario than initially thought, UBS analyst Dan Rollins said after several meetings with company management. He now sees the potential for annual gold production of 328,000 ounces, which would raise capital costs at a time of industry-wide cost inflation.

Upside: Mr. Rollins, citing the equity dilution that would result from higher financing requirements, cut his price target by $1.50 to $13.50.

Trinidad Drilling Ltd. has underperformed its peers over the past few months, making its valuation look more attractive, said Canaccord Genuity analyst John Tasdemir. He upgraded the stock to a “buy,” also citing the company’s improved growth prospects, impressive technology and manufacturing capabilities, and strong customer relationships.

Upside: Mr. Tasdemir has a price target of $11.25.

Northland Power Inc. has several new power projects coming on line and is continuing to diversify its asset base both technologically and geographically as it looks to develop in the United States, noted Canaccord Genuity analyst Juan Plessis. While the company’s payout ratio may rise above 100 per cent through 2013, the company appears to have sufficient access to cash to maintain its dividend, he added.

Upside: Mr. Plessis upgraded the stock to a “buy” from “hold” while hiking his price target by $1 to $17.

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