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Dollarama gets a 'strong buy' rating after recent pullback

At least one analyst believes Dollarama has a leg up on its U.S. competition and can reach its goal of 1,000 stores in Canada in the next few years.

Deborah Baic/The Globe and Mail

Inside the Market's roundup of some of today's key analyst actions

Now is the time to buy shares in Dollarama Inc., urges Industrial Alliance Securities analyst Neil Linsdell, noting that the stock has pulled back nearly 15 per cent in just one month.

Similar pullbacks have occurred among peers, such as Dollar Tree, Dollar General, and Family Dollar, partly reflecting investor concerns over the "fiscal cliff," fuel costs and consumer spending.

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But Mr. Linsdell notes that Dollarama has been performing better than peers in its most recent quarter, with its same-store sales growth of 6.6 per cent better than the 5.1 per cent of a year ago.

"For next year, the consensus expectation is for revenue growth of over 13 per cent, following over 15 per cent in this year, which comes to a close in January. By virtually every metric (operating margin, EPS growth, etc…), Dollarama continues to be the industry leader," he said.

Meanwhile, new store openings continue at an even more aggressive pace and the company's strong financials could lead lead to further dividend increases, he said.

Upside: Mr. Linsdell upgraded Dollarama to "strong buy" from "buy" while maintaining a $67 price target.


Bernstein Research's Toni Sacconaghi, citing an extensive review of his corporate model, has become the latest analyst to lower his price target on Apple Inc. "In the near term, we suspect that Apple's stock could continue to be range-bound, given worries about the company's ability to eclipse first-quarter and full-year fiscal year 2013 estimates and given questions about the trajectory of gross margin improvement," quoted him as saying in a research note. "For longer-term investors, we believe that Apple offers a compelling combination of attractive growth, reasonable price and significant future option value."

Upside: Mr. Sacconaghi cut his price target by $50 to $750 (U.S.).

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RBC Dominion Securities analyst Sara O'Brien upgraded Stantec Inc. to "outperform" from "sector perform," praising the company for its earnings predictability and growth through several manageable acquisitions.

"We like STN's fundamentals, solid margin, organic and acquisition growth, and healthy balance sheet and free cash flow," she said.

Upside: Ms. O'Brien raised her price target by $5 to $47.


RBC Dominion Securities analyst Joseph Spak nudged up his expected returns from General Motors Co. after the automaker announced this week it will buy back 200 million shares from the U.S. Treasury at a total cost of $5.5-billion. "While the removal of the government overhang is nice, the real drivers of our optimism are" the lower resulting share count and a continued "very strong" balance sheet, he said.

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Upside: Mr. Spak increased his price target by $1 to $36 and affirmed an "outperform-average risk" rating.


Belo Sun Mining Corp. released an updated resource estimate for the Volta Grande project that includes an increase in both total ounces and grade, noted CIBC World Markets analyst Jeff Killeen. "The updated resource estimate highlights the success Belo Sun has had at Volta Grande as total ounces and grade have increased 84 per cent and 4 per cent, respectively, in 2012," he said.

Upside: Belo is CIBC's top pick among junior explorers and Mr. Killeen raised his price target by 25 cents to $2.75.

For more analyst actions, breaking investing news and analysis, follow Darcy Keith on Twitter at @eyeonequities

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About the Author
Investment Editor

Darcy Keith is The Globe and Mail's Investment Editor. He has been a business journalist since 1992 and joined the Report on Business in 2010 from Yahoo! Canada, where he was the senior editor of finance. More


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