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Downgrades for HudBay Minerals, Microsoft

Production at HudBay mine.

Brian Pieters

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

UBS Securities Canada analyst Matt Murphy has downgraded HudBay Minerals Inc. to "neutral" from "buy," citing valuation concerns. The stock has risen by about 35 per cent since July.

Meanwhile, the company's 2013 guidance this week outlined costs that were higher than what Mr. Murphy had expected at some properties.

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Upside: Mr. Murphy cut his price target by 50 cents to $11.50.

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Morgan Stanley downgraded Microsoft Corp. to "equal weight" from "overweight," citing a disappointing Windows 8 launch and ongoing weak demand for personal computers.

While Microsoft "is far too cheap, has multiple non-PC drivers and an attractive 3.5 per cent dividend yield," the stock will likely be range-bound, as a lack of competitive offerings, touch devices and compelling price points are hindering consumer appetite for Microsoft's new operating system, said analyst Adam Holt.

Upside: The average price target on the Street is about 34 (U.S.), with 28 analysts recommending Microsoft as a buy and 17 as a hold, according to Bloomberg data. No analyst is recommending selling.

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Mullen Group Ltd., which provides transportation and related services to the oil and natural gas industry in Western Canada, is facing challenges related to a slowdown in drilling activity. But CIBC World Markets analyst Kevin Chiang notes the rest of Mullen's operations "reveals a decidedly more upbeat outlook." Oil sands activity is expected to remain strong, while trucking activity should benefit from a robust economy in Western Canada as well as from future oil-by-truck opportunities, he said.

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Upside: Mr. Chiang upgraded Mullen to "sector performer" and raised his price target to $23.25 from $22.

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Investors should buy into the recent weakness in Lululemon Athletic Inc. stock, advises Canaccord Genuity analyst Camilo Lyon. The stock has fallen on worries about price discounting on sales post-Christmas, but Mr. Lyon believes the mix of sale and full price items has actually improved year over year, "despite LULU going farther out on the fashion curve."

"Importantly, the brand still resonates strongly with its consumer base despite increasing competition," he said.

Upside: Mr. Lyon maintained a "buy" rating and $91 (U.S.) price target.

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CIBC World Markets analyst Kevin Chiang downgraded Just Energy Group Inc. to "sector underperfomer" from "sector performer," noting its 29 per cent share price rally over the past two months.

"While we expect JE to maintain its dividend, we believe there is limited upside in its share price north of $10," Mr. Chiang said in a research note. "Concerns over JE's rising debt levels as it funds its growth initiatives will continue to weigh on investor sentiment, combined with the challenging gas price environment."

Downside: Mr. Chiang maintained a $9.50 price target.

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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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