Inside the Market's roundup of some of today's key analyst actions. This file will be updated during the trading day so check back for new details.
Rogers Communications Inc. (RCI.B-T) has positioned itself to make "bigger gains" in the coming year, said CIBC World Markets Robert Bek.
Saying it is "still time to buy" the stock, he upgraded his rating for it to "sector outperformer" from "sector performer."
"While [the third quarter] still might see some stumbles, we believe that downside from current levels is limited, and one can buy shares now, collect a 4.1-per-cent yield, with an expectation of upside as momentum turns in both wireless and cable markets towards the end of [the 2015 fiscal year and into the 2016 fiscal year," said Mr. Bek.
The analyst highlighted the following factors in explaining his updated stance:
- With cable and telecom operators existing now on "mostly mature platforms," broadband is one of the lone sources of market growth, and the push in broadband to 1-gigabit "highlight cable's distinct network advantage." He said companies, like Rogers, are able to get to these spoeeds faster and with minimal relative expenditures, adding: "The capital efficiency argument is one reason to look much more favourably on Rogers' cable assets."
- Canada's wireless industry "remains among the best-in-class globally, and while Rogers momentum here is still somewhat weak relative to peers, there is reason to believe we are close to finding a bottom." He added: "Rogers is well positioned in a data-centric wireless world."
- The company's enterprise unit, a "key focus area," is starting to show its first public initiatives through product sets and commerical offers, including managed WiFi to virtual managed network services. He said: "Given the growth trajectory of the industry, and given just how under-indexed Rogers is in enterprise relative to its telco competitors, there is plenty of upside here."
- The hype around the Toronto Blue Jays' playoff run may have a "potential halo effect" on brand and retention, which he said may trickle into its cable and wireless segments.
Mr. Salmon also raised his price target for the stock to $50 from $46, compared to a consensus of $46.38.
"We believe Rogers has one of the best asset mixes, and is therefore best positioned for the maturity that is now upon the cable/telecom industries," he said.
Netflix Inc (NFLX-Q) is a "highly dynamic company and an innovation leader," according to BMO Nesbitt Burns analyst Dan Salmon.
Saying its' success is "the sum of all (media) fears," he initiated coverage of the stock with a "market perform" rating.
"With Netflix the focal point for disruption of the traditional TV ecosystem, we believe NFLX shares properly value the opportunity and the inherent risks of this position and would look for a pullback or incremental news (e.g., faster-than-expected international expansion) to get more productive on the stock," said Mr. Salmon. "With high volatility around the quarters - largely driven by subscriber growth performance versus guidance and expectations - investors tend to get opportunities regularly."
Beyond trajectory of subscriber growth, Mr. Salmon pointed to the following variables as key to the stock's value:
"1) The evolution of Netflix's content acquisition strategy to focus more on originals (and thus more cash outlays upfront) and the ability to secure global rights for programming; 2) pricing power for the service, especially in the United States (we compare cost per hour viewed for Netflix vs. major premium cable networks and the pay TV bundle as a whole in the report); and 3) a risk of accelerating marketing expense growth as competition increases, new markets are entered, and premiering originals are in need of promotion."
He set a price target of $115 (U.S.) for the stock. The analyst consensus is $119.30.
"Our target implies that NFLX shares trade at 95x [entreprise value/earnings before interest, taxes, depreciation and amortization], which is well above the 10x average of major media and internet companies and deserved, in our opinion, owing to a disruptive model, faster revenue growth, and the international opportunity ahead," he said.
Despite "positive" exploration results from its Bluejack gold project in northern British Columbia, Pretium Resources Inc. (PVG-T) was downgraded to "hold" from "speculative buy" by Canaccord Genuity analyst Joe Mazumdar.
The analyst noted Pretium has outperformed the GDXJ benchmark since early September, rising 36 per cent compared to 10-11 per cent. He said the outperformance came in the wake of the company's announcement that it secured a $540-million (U.S.) construction financing package for Bluejack.
He did not lower his price target of $9.15 (Canadian) for the stock, compared to a consensus of $11.95. His target implies a less-than-5-per-cent return from current levels.
"The modest implied return to current levels (approximately 6 per cent) have led us to lower our recommendation," said Mr. Mazumdar.
By owning stock in Richelieu Hardware Inc. (RCH-T), investors "gain exposure to an extremely well-managed company that has a differentiated value proposition and generates solid profitability," said Desjardins Securities analyst Chase Bethel.
The analyst said the company's "robust top-line growth" was the primary driver of third-quarter results which exceeded expectations. Richelieu's consolidated sales grew 18.9 per cent on the quarter, leading to sales of $199.5-million that beat consensus estimates.
"From a sales growth standpoint, it was difficult to identify a weak spot in Richelieu's results," said Mr. Bethel. "The company achieved strong sales growth in both Canada and the US, and across both of its primary customer segments (manufacturers and retailers). We estimate that consolidated organic growth increased by 12.0 per cent excluding the impact of [foreign exchange]. The highlight of the quarter, in our view, was that the company achieved two consecutive quarters of [greater than] 20-per-cent growth in sales to retailers in Canada."
He added: "Richelieu ended the quarter with a net cash position of $16.9-million, giving the company tremendous financial flexibility. Acquisitions remain the company's priority in terms of using excess cash. We expect the company to increase its dividend (approximately 7–13 per centis within the range of reasonableness, in our view) when it reports its fiscal year-end results in January 2016; and, it also appears that management would be willing to complete share buybacks (subject to the availability of large trading blocks) at current share trading levels (ie $70/share).
He maintained his "buy" rating for the stock while increasing his target to $79 (Canadian) from $71. The analyst consensus is $70.67.
"At this juncture, we feel comfortable rolling forward our valuation basis given strong underlying trends in the company's business, its solid financial position and management's confidence in the outlook," said Mr. Bethel.
In other analyst actions:
ABB Ltd (ABB-N) was raised to "hold" from "underperform" at Jefferies by equity analyst Graham Phillips. The 12-month target price is $18 (U.S.) per share.
BioMed Realty Trust Inc (BMR-N) was downgraded to "Market Perform" from "Outperform" at Raymond James by equity analyst William Crow. It was also also downgraded to "neutral" from "outperform" at Robert Baird by equity analyst Dave Rodgers with a target price of $24.
Condor Petroleum Inc (CPI-T) was downgraded to "market perform" from "outperform" at FirstEnergy Capital by equity analyst Darren Engels. The 12-month target price is 25 cents (Canadian) per share.
Ecolab Inc (ECL-N) was downgraded to "neutral" from "overweight" at JPMorgan by equity analyst Jeffrey Zekauskas. The 18-month target price is $120 (U.S.) per share.
Edwards Lifesciences Corp (EW-N) was rated new "outperform" at Cowen by equity analyst Joshua Jennings. The 12-month target price is $185 (U.S.) per share.
Eagle Materials Inc (EXP-N) was downgraded to "neutral" from "buy" at Longbow Research by equity analyst Garik Shmois.
FireEye Inc (FEYE-Q) was raised to "hold" from "sell" at Gabelli & Co. by equity analyst Hendi Susanto.
Global Payments Inc (GPN-N) was downgraded to "hold" from "buy" at Jefferies by equity analyst Jason Kupferberg. The 12-month target price is $135 (U.S.) per share.
Gap Inc (GPS-N) was downgraded to "neutral" from "buy" at MKM Partners by equity analyst Roxanne Meyer. The 12-month target price is $29 (U.S.) per share.
JB Hunt Transport Services Inc (JBHT-Q) was rated new "neutral" at UBS by equity analyst Thomas Wadewitz. The 12-month target price is $81 (U.S.) per share.
Jabil Circuit Inc (JBL-N) was rated new "buy" at B. Riley by equity analyst Andrew Huang. The 12-month target price is $29 (U.S.) per share.
Annaly Capital Management Inc (NLY-N) was raised to "market perform" from "underperform" at FBR Capital Markets by equity analyst Daniel Altscher. The 12-month target price is $11 (U.S.) per share.
Parsley Energy Inc (PE-N) was rated new "outperform" at IBERIA Capital Partners by equity analyst Eli Kantor. The 12-month target price is $21 (U.S.) per share.
Tesla Motors Inc (TSLA-Q) was downgraded to "underweight" from "equal-weight" at Barclays by equity analyst Brian Johnson. The target price is $180 (U.S.) per share.
Wells Fargo & Co (WFC-N) was raised to "overweight" from "neutral" at JPMorgan by equity analyst Vivek Juneja. The 18-month target price is $58.50 (U.S.) per share.
With files from Bloomberg News