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.
Canaccord Genuity is taking a more conservative outlook on the price of natural gas, and has downgraded two energy producers in the process.
Canaccord now projects natural gas will average $3.87 (U.S.) per thousand cubic feet this year, down from $4.06. Next year, it projects natural gas to average $4.25 instead of $5.25. The downward revisions primarily reflect slightly higher-than-expected natural gas production in the U.S. as of mid-2013.
“Supply/demand fundamentals could support a $5.25/Mcf outlook in the 2015-and-beyond period. However, for now, we are conservatively lowering our 2015 forecast from $5.25/Mcf to $4.50/Mcf and our long-term forecast from $5.25/Mcf to $4.75/Mcf,” Canaccord analysts said in a research note. Canaccord also modestly raised its West Texas Intermediate oil price forecast while lowering its forecasts for Brent crude.
Both ARC Resources Ltd. and Peyto Exploration & Development Corp. were downgraded to “hold” from “buy.”
Analyst Steve Toth said ARC shares now reflect fair value, trading at a premium to peers thanks to the company’s high quality asset base, strong balance sheet and steady growth profile.
Similarly, Peyto shares are fairly valued, even though he applauds the company for an “industry-leading cost structure and a clear roadmap to double-digit growth.”
Target: Mr. Toth reduced his price target on ARC to $29 from $29.50; for Peyto, he cut his target to $32 from $33. The average price targets are $29.57 and 33.50, respectively, according to Bloomberg data.
Apple Inc. could deliver upside surprises on revenue, gross margin and earnings per share when it reports its June quarter on Tuesday, said BMO Nesbitt Burns analyst Keith Bachman.
He expects Apple to provide flat revenue guidance for the September quarter from the June quarter, about $2-billion less than consensus estimates. But the variance between revenue guidance and existing consensus estimates will be less than in the past few quarters, he said. Apple tends to be conservative in forward projections, which has helped it to beat Street forecasts in the past.
“While we still have longer-term concerns about the lower and greater distribution of the smartphone profit pool, we are more encouraged about Apple's ability to sustain healthy profits over the near and medium term,” he said.
Target: Mr. Bachman raised his price target to $480 from $450 (U.S.) and reiterated a “market perform” rating. The average target is $527.88.
BMO Nesbitt Burns analyst David Chiaverini downgraded TD Ameritrade Holding Corp. to "market perform" from "outperform," believing the stock's greater than 50 per cent rise so far this year has left it as a less compelling investment.
TD Ameritrade is now trading at 20.3 times Mr. Chiaverini's 2014 earnings per share estimate, well above the historical median of 16.1 times based on forward 12-month estimates.
"Despite our downgrade, we continue to like TD Ameritrade's positioning given its leadership among self-directed firms for equity and options trading, strong asset gathering, and low balance sheet risk given its relationship with TD Bank," Mr. Chiaverini said. "Besides a pullback in the shares, we would look to get constructive again if 1) trading activity returns to more normalized levels, 2) interest rates continue to march higher and the expectation for a 100 bp Fed funds rate moves up from the current January 2016 time frame, and/or 3) its fee-based revenue growth outpaces our estimate of 20 per cent to 25 per cent annual growth as it increases focus on advice-based asset gathering."
Target: Mr. Chiaverini has a $26 (U.S.) price target. The average target is $23.87.
RBC Dominion Securities analyst Sara O’Brien sees strong organic growth ahead in Stella-Jones Inc.’s pole-making business over the next few years, as well as likely acquisitions that will boost earnings growth.
Increasing demand is already being seen from North American utilities, with some clients boosting purchase plans by 20 per cent. The company has increased its invetories to help prepare for this demand, Ms. O’Brien noted.
Meanwhile, Stella-Jones continues to find greater synergies from its acquisition last year of McFarland Cascade Holdings Inc., which boosted its presence in the North American wood treating business.
Target: Ms. O’Brien raised her price target to $120 from $105 and reiterated an “outperform” rating. The average target is $101.43.
CIBC World Markets analyst Jeff Killeen initiated coverage on Continental Gold Ltd. with a “sector outperformer” rating, calling the company a “preferred name” among junior explorers given the high grades and significant resource grwoth potential at its flagship Buriticá project in Colombia.
Continental is fully committed to the project, with underground development well under way, Mr. Killeen noted. He thinks high grades will drive strong margins at the project, which will aid the project’s development if commodity prices decline further.
“Currently trading at 0.6 times our net asset value, and with a strong balance sheet, insulation against softening commodity prices, and potential for further resource expansion, we believe CNL represents a sound investment,” he said.
Mr. Killeen is projecting the project will begin full production by 2017.
Target: Mr. Killeen set a price target of $5.50. The average target is $7.75.
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