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.
The lack of consensus in the analyst community over BlackBerry Ltd.'s fate is in full display again this morning, with both an upgrade and a downgrade and price targets continuing to be all over the map.
Trading in the smartphone maker reflects this air of uncertainty on the Street. Shares slipped in and out of the red in U.S. premarket trading in unusually heavy volume. In early regular Nasdaq trading, shares were down 1.8 per cent at $7.81 (U.S.).
For investors still holding BlackBerry shares, the most worrisome note was issued by Bernstein Research, which downgraded its rating to "underperform" - reversing an upgrade made just on Monday. Its price target was slashed all the way to $4.50 (U.S.), half of the tentative offering price made public by Fairfax Financial.
Bernstein analysts altered their view after reading through BlackBerry's regulatory filing late on Tuesday that expanded upon the troubles it faces. Bernstein says BlackBerry's cash position is far worse than previously thought, and the firm now projects that the company will burn through close to $2-billion over the next two quarters. With the situation that dire, Bernstein sees "almost no chance" that BlackBerry will secure the financing and support it needs for its bid.
"Because the company is losing users at a very high pace, has a stretched working capital and massive off-balance-sheet commitments that will turn into actual cash burn in the next four quarters, we believe Blackberry is likely to burn close to $2-billion in the next six quarters on a standalone basis, leading the company into material liquidity problems," StreetInsider.com quoted Bernstein analyst Pierre Ferragu as saying.
"We see a remotely possible 'strategic acquisition' as the only upside risk left on the stock and barely any valuation floor," he added.
But there are signals this morning that the outlook for BlackBerry isn't quite that bleak. New York-based private equity firm Cerberus Capital Management LP is seeking to sign a non-disclosure agreement so that it may review confidential BlackBerry information that is only available to prospective buyers, according to several media reports. And the Globe and Mail is quoting sources as saying Fairfax has been surprised by the number of overtures from potential partners it has received in the past week. Cerberus is reportedly not part of the Fairfax group, which raises the possibility of competing offers should it decide to proceed.
Citigroup analyst Jim Suva provided a more optimistic view today, upgrading his rating on BlackBerry to "neutral" from "sell" and raising his price target to $9 (U.S.). Scotiabank also cut its target on BlackBerry by $1.30 to $10.60.
Target: The average target among analysts is $8.44 (U.S.), according to Bloomberg data.
BMO Nesbitt Burns analyst Stephen Atkinson has raised his share price target for Domtar Corp., expecting that higher market prices for pulp and paper products will lift the Montreal-based company's profit next year.
Mr. Atkinson has raised his 2014 profit outlook for Domtar to $8.70 a share, even as he reduced the EPS target this year due to wet weather in the U.S. Southeast that is making it harder and more expensive to harvest timber.
"Domtar offers an attractive dividend [2.9 per cent], a strong balance sheet and increasing participation in the growing personal care market," said Mr. Atkinson, who says the company is one of BMO's "preferred value investments."
"On a 2014E EV/EBITDA basis, Domtar is one of the most inexpensive stocks we follow," he wrote in a research note.
Target: Mr. Atkinson raised his share price target to $100 (U.S.) from $90 and maintained a rating of "outperform." The average target is $86.75.
Dow Chemical Co. has provided greater clarity on its Sadara Middle East project, including details on its products and financials.
Dow Chemical has a 35 per cent stake in Sadara, which will be a large petrochemical complex in Jubail, Saudi Arabia.
"Overall, Dow believes the project is on track and on budget, commented Credit Suisse analyst John McNulty, who reiterated an "outperform" rating on Dow Chemical shares.
"We believe the investment is attractive given the high returns and earnings potential over the next 3-5 years," he said.
Target: Mr. McNulty raised his price target to $45 (U.S.) from $39. The average target is $40.67.
Credit Suisse analyst Sanjeet Aujla has downgraded brewer SABMiller Plc over an expected sales slowdown in emerging markets.
In a research note on Thursday, Mr. Aujla said 2014 "looks tough" for the beer maker, which makes several global brands. In addition to weakness in emerging markets, the company faces reinvestment requirements and foreign exchange rates that are no longer in its favour.
"Unlike some staples, we do not think SAB is likely to significantly raise prices to offset the consequent imported inflation in many of its [emerging markets] given its great focus on affordability," he said.
Target: Mr. Aujla downgraded SABMiller to "neutral" from "outperform" and reduced the share price target to 32.50 pounds from 38 pounds.
Precision Castparts Corp. is an attractive stock for investing in the cyclical upturn in the aerospace industry, said Credit Suisse analyst Robert Spingarn in reiterating an "outperform" rating.
"Given its relative underperformance (+21 per cent year to date vs. peers +45 per cent), its reasonable valuation (16.4x FY2 P/E vs. 18.5x for growth peers), and upcoming catalysts, we see shares outperforming the group into year end, " he explained. "Investor fears about sluggish organic growth and jet engine original equipment manufacturing de-stocking should begin to fade post fiscal second quarter results as Precision Castparts potentially surprises to the upside enabling focus to shift to a revenue & earnings inflection in fiscal fourth-quarter 2014 (March)."
Target: Mr. Spingarn raised his price target to $287 (U.S.) from $240. The average target is $261.
Canaccord Genuity analyst Derek Dley is warning Maple Leaf Foods Inc.'s 2015 EBITDA margin target of 11.4 per cent for its Protein Group is looking increasingly unattainable now that it has decided to sell its high-margin Rothsay Rendering business to Darling International. The sale is expected to close by year-end.
"We note that Rothsay Rendering generated EBITDA of $85-million in 2012, with an EBITDA margin of about 27 per cent. Meanwhile, the company's Meat Products division generated an EBITDA margin of about 6 per cent during 2012," he said.
He expects the company to update its margin guidance when it announces third-quarter earnings.
Target: Mr. Dley cut his price target by $1 (Canadian) to $14 and reiterated a "hold" rating. The average target is $15.83.
In other analyst actions today:
Dundee Securities upgraded TransGlobe Energy to "buy" and raised its target to $12.50 (Canadian) from $8.10.
Pivotal Research downgraded Facebook to "hold" from "buy" with a price target of $48 (U.S.)
UBS raised its price target on Autodesk Inc. to $49 (U.S.) from $42 and maintained a "buy" rating.
Canaccord Genuity raised its price target on Monsanto Co. to $124 (U.S.) from $121 and maintained a "buy" rating.
Credit Suisse initiated coverage on Murphy Oil. Corp. with a "neutral" rating and $70 (U.S.) price target.
Cantor Fitzgerald initiated coverage on Tiffany & Co. with a "buy" rating and $88 (U.S.) price target.
RBC Dominion Securities initiated coverage on TC Pipelines with a "sector perform" rating and $51 (U.S.) price target.
Goldman Sachs raised its price target on Pandora to $35 (U.S.) from $30. BMO Nesbitt Burns raised its target to $32 (U.S.) from $25.
Raymond James upgraded AuRico Gold to "outperform" from "market perform" with a price target of $5.75 (U.S.).
For more analyst actions, breaking investing news and analysis, follow Darcy Keith on Twitter at @eyeonequities