The Canadian Press
Inside the Market's roundup of some of today's key analyst actions. This post will be updated with more analyst commentary during the trading day.
JPMorgan has initiated coverage on Canadian telecoms with a favourable view, forecasting solid growth in a sector that should continue to dole out healthy dividends.
"The wireless industry continues to grow in subscribers at a faster pace relative to the U.S. and data usage continues to ramp higher. Cable and fiber high-speed Internet subscriber growth is robust, and the video market remains relatively stable," JPMorgan analysts led by Richard Choe said in a research note. "We see stable margins for the Canadian communications companies and capex spending is under control, driving solid free cash flow for the sector."
The analysts expect the Canadian wireless industry to grow subscribers 3.2 per cent in 2013 from last year, and 3.5 per cent year over year in 2014. With wireless penetration rates only near 80 per cent in this country compared to over 100 per cent for the U.S., they see considerable room for putting more wireless devices into the hands of Canadians.
Meanwhile, wireline declines are slowing and being offset by greater video and data consumption. Cable losses should moderate as they grow their home phone subscribers, they said.
The big risk for these stocks: possible government regulations that could throw more competition their way. The overall economy could be a potential challenge, as well.
JPMorgan started coverage on BCE Inc. and Rogers Communications Inc. with "overweight" ratings, with price targets of $51 and $49, respectively. The analysts were a little less upbeat on Telus Corp., which got a "neutral" rating, with a target of $37.
"The three Canadian communications companies on which we launch have remained relatively flat for the year and are trading at the lower end of their historical valuation ranges" the analysts noted. "We believe the stocks should rally significantly if the new entrant overhang is removed either if no large foreign telecom companies apply to bid in the 700 MHz auction (deposit deadline Sept. 17, public Sept. 23) or win any spectrum during the auction (March/April 2014). If a well-funded new entrant enters, we see significant negative impact for all three carriers."
"Bell Canada is our top pick with its strong potential growth in wireless, IPTV and fiber broadband," the analysts concluded. "We see Rogers as a relatively low risk, high reward play as wireless and cable fears look overblown to us. Finally, we see potential risk to wireless and wireline results for Telus long-term, but see the stock supported by its strong dividend growth and stock buyback."
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CIBC World Markets analyst Robert Bek upgraded Cineplex Inc. to "sector outperformer." Mr. Bek said in a research note on Friday the movie theatre chain is enjoying strong box-office sales and should see benefits from recent acquisitions.
In the summer, Cineplex grabbed 78 per cent of the Canadian move house market with the purchase of some of Empire Co.'s theatres. It also paid $40-million (Canadian) for digital sign maker EK3 technologies. Last year, Cineplex bought four Canadian theatres from AMC.
Mr. Bek said ticket sales in the third quarter rose by 3.5 per cent over last year and are expected to stay strong as the year ends, given the lineup of movies about to be released. Toronto-based Cineplex shares have risen by 20 per cent this year.
Target: Mr. Bek, who previously rated Cineplex "sector performer," maintained a $42 share price target.
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Raymond James analyst Theoni Pilarinos reiterated a "market perform" rating on Student Transportation Inc., a company based in Barrie, Ont., that operates school buses and dispatch services in Canada and the United States.
Mr. Pilarinos said the company has met his forecasts for revenue and profit, and he likes its efforts to improve margins with its leasing program and by driving lower-cost alternative fuel buses.
The company's shares fell in July after a short seller, Prescience Investment Group of Baton Rouge, La., alleged the company did not have enough cash to pay for its dividend. The company denied it had any such problems and the shares have since recovered to post a year-to-date gain of six per cent.
Target: Mr. Pilarinos maintained a $6.75 (Canadian) share price target.
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Cowen upgraded Facebook to "outperform" from "market perform" and raised its price target to $53 (U.S.) from $29.
Goldman Sachs reinstated coverage on Thomson Reuters with a "neutral" rating and $35 (U.S.) price target.
Goldman Sachs initiated coverge on Silver Wheaton with a "buy" rating and $15 price target.
Goldman Sachs initiated coverage on Goldcorp with a "buy" rating and $40 (Canadian) price target.
BMO Nesbitt Burns raised its target on Macdonald, Dettwiler and Associates to $87 (Canadian) and reiterated an "outperform" rating.
Canaccord Genuity upgraded Urban Outfitters to "buy" from "hold."
Scotia downgraded Methanex to "sector perform" from "sector outperform."
BMO Nesbitt Burns raised its target on Laredo Petroleum to $34 (U.S.) from $27 and reiterated an "outperform" rating.
BMO Nesbitt Burns raised its target on Dollar Tree to $70 (U.S.) from $63 and reiterated an "outperform" rating.
BMO Nesbitt Burns raised its target on Starbucks to $85 (U.S.) from $82 and reiterated an "outperform" rating.
Credit Suisse downgraded Clorox Co. to "underperform" from "neutral" and raised its price target to 425 (U.S.) from $23.
UBS hikes its target on Agilent Technologies Inc. to $57 (U.S.) from $50 and maintained a "buy" rating.
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Darcy Keith
Eric Atkins