Inside the Market's roundup of some of today's key analyst actions
Raymond James is "bullish" on the forest products and building materials sector "with strong fundamentals and lumber stock valuations generally ignoring potential for export duty reductions or negotiated settlement potential" as part of the Canada/U.S. softwood lumber dispute.
"Whether a deal is reached imminently or not we expect the stocks to move as the market begins to price in settlement potential or potential for duty reductions and encourage investors to add to positions," said analyst Daryl Swetlishoff.
The analyst boosted his rating on Western Forest Products Inc. (WEF-T) to "strong buy" from "outperform." It has a similar rating on Acadian Timber Corp. (ADN-T) , CanWel Building Materials Group Ltd (CWX-T), Canfor Corp. (CFP-T), Interfor Corp. (IFP-T), and Norbord Inc. (OSB-T).
His price target on Western Forest remains at $2.75. The consensus is $2.59, according to Thomson Reuters.
"Despite boasting strong balance sheets and well capitalized assets with high free cash flow potential, building materials stock valuations continue to lag strong fundamentals. At YTD benchmark lumber pricing, lumber stocks are pricing in an average 35 per cent to 40 per cent total duty load (relative to the preliminary 27 per cent average). Looking at it the other way; based on 27 per cent average duties, stocks are pricing in about $360 (U.S.)/mfbm [thousand board feet] average lumber prices with smaller cap names Conifex, Interfor and Western discounting about $350 or less (relative to the $367 YTD average and RJL's $400 2018 forecast). The valuation/fundamental mismatch backstops the average about 37 per cent return implied in our target prices," the analyst said.
Air Canada (AC-T) has been on a roll, and reported that after Canada Day and the Independence Day holiday in the U.S. it transported nearly one million passengers throughout that six-day holiday period, said Beacon Securities Ltd. analyst Ahmad Shaath.
"The company indicated that it achieved a single-day record, on June 29th, carrying 166,850 customers," he said. "More importantly, in its press release Air Canada updated investors that it expects to "significantly exceed the current average analyst consensus estimate" for Q2/FY17 EBITDAR [earnings before interest, taxes, depreciation, amortization and rent costs], which was $475-million (we were forecasting $465- million). The company attributed their expectations to the higher revenue and, most importantly in our opinion, lower-than-projected fuel costs."
Mr. Shaath maintained his "buy" rating on the stock, but boosted his price target to $26 from $21. The consensus is $20.63.
"Despite climbing more than 40 per cent in 2017 to reach all-time highs, AC shares continue to trade at attractive valuation as this rally is supported by improving fundamentals. Our revised estimates call for Q2/FY17 and FY17 EBITDAR of $541-million and $2,741-million, respectively. Consequently, AC continues to trade at a significant discount to legacy carriers (4.4 times FY17E EBITDAR versus 6.2 times for U.S. peers and 5.4 times for global peers)."
AltaCorp Capital Research kept its "outperform" rating on Air Canada and boosted its target price to $27 from $25. It also raised its estimates.
"We are updating our estimates with changes in our fuel and currency estimates. We forecast Q2/17 revenue, EBITDAR and Adjusted FD EPS of $3,794-million, $586-million and 54 cents as compared to consensus expectations for $3,807-million, $538-million and 25 cents."
The research firm also said: "For Q2/17, we are forecasting year-over-year traffic and capacity growth of 13.5 per cent and 13.1 per cent, respectively resulting in a load factor of 82.7 per cent, up 0.2 per cent."
Cardinal Resources Ltd. (CDV-T) starts trading Monday on the Toronto Stock Exchange under the symbol CDV.
"We reiterate our thesis that CDV is poised to unlock the potential of one of the largest discoveries in the last 15 years – Namdini with a 4.6MM oz global resource," said Clarus Securities Inc.
"We see significant further upside to the current resource as Namdini remains open along strike as well as at depth. Overall, we continue to believe that a growing resource footprint, strengthened technical team and the recent 6.4 per cent (about 10 per cent on FD basis) equity investment by a major (Gold Fields) are important de-risking milestones that validate the potential of the Namdini project. In our opinion, Namdini has the potential to support a about 200k oz/year production profile over a 10-plus year mine life."
Clarus maintained its "speculative buy" rating and a target price of 90 cents per share.
Intel Corp. (INTC-Q) has "the most to lose" in the "4th tectonic shift in computing," said research firm Jefferies as it downgraded the stock on Monday.
Jefferies downgraded the stock to "underperform" from "hold" and dropped its price target to $29 (U.S.) from $38. The consensus is $39.76.
Jefferies said it is downgrading Intel because "its Xeon/Xeon PHI platform is disadvantaged versus Nvidia in emerging parallel workloads like deep neural networking." Nvidia has been on the rise, partly due to rapid growth in its data-centre business.
In a separate note, Jefferies said there will be a big shift in the industry that will favour parallel computing platforms that are already being used by companies including AMD, Nvidia, Cavium and Xilinx.
BMO Capital Markets analyst Tim Long is upgrading Juniper Networks (JNPR-N) as the firm believes "the shares are ripe for a turnaround as more credit is given to the switching business, customer diversification strategy, strong opex [operational expenditure] management, and balance sheet flexibility."
BMO raised its rating to "outperform" from "market perform" and boosted its target price to $34 (U.S.) from $31. The consensus is $30.71.
"At 12 times 2018 EPS estimates, we believe the shares are undervalued, with Juniper not getting enough credit for its switching business, success in the cloud vertical, opex management, and balance sheet flexibility. Juniper is trading near the bottom of its historical multiple range, and we expect the stock to work as the company gets more credit for its growth and improving fundamentals," the analyst said.
Ahead of Facebook Inc.'s (FB-Q) second quarter results, Credit Suisse is boosting its target price on the stock.
"We preview Facebook's 2Q17 results – we recalibrate our productby-product model and our price target rises modestly to $180 (U.S.) from $175 as we increase our mobile newsfeed and app install pricing estimates from what we felt were overly conservative levels – our FY17 EPS is now $5.08 versus prior $4.98."
"Our DCF [discounted cash flow]-based end-of-2017 price target, which uses a 10.5-per-cent weighted average cost of capital and 3 per cent terminal growth rate increases to $180 versus prior $175 and we introduce an end-of-2018 price target of $220. Slower-than-expected advertiser adoption either on a product-by-product or regional basis for Facebook's various ad units is a risk to our estimates," Credit Suisse analyst Stephen Ju said.
The analyst kept his outperform rating. The consensus for the stock is $168.98.