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Inside the Market's roundup of some of today's key analyst actions.
Infrastructure and construction company Canam Group Inc. (CAM-T) is a "unique and attractive play on the expanding U.S. construction markets," says Raymond James analyst Frederic Bastien. However, his price target for the company is being reduced to $15 from $19 due to a provision on a large-scale job that Bastien says will impact second quarter results.
"The steel fabricator announced that an in-depth review will lead to the recording of an after-tax reserve of $32-million, or the equivalent of $0.68 per share, to reflect the revised cost estimates for a significant project. For those keeping tabs, that's half the earnings we were projecting for the company this year," Mr. Bastien said in a note.
The large-scale project is suspected to be a new sports stadium in Atlanta.
His rating stands at "outperform." The consensus price target for the stock is $15.79, according to Thomson Reuters.
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Water treatment firm Ovivo Inc. (OVI.A-T) had a recent stock-price turnaround after November's lows, resulting in an acquisition bid from SKion and la Caisse for $4.00 a share, which is a "a done deal," says Raymond James analyst Frederic Bastien.
The price target increased to $4 from $3 to reflect this proposed arrangement.
Mr. Bastien called the purchase price fair: "SKion and la Caisse's resources, long-term vision [are] arguably better suited for Ovivo's game plan," which include making the company "the cornerstone of a global water treatment platform anchored in Quebec." The rating also moves down from "outperform" to "market perform."
The consensus is $3.88.
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Health-care services company Medical Facilities Corp. (DR-T) has a strong intention to acquire a majority interest in Unity Medical and Surgical Hospital in Indiana for $54-million (U.S.), a deal Canaccord Genuity analyst Neil Maruoka says is "an excellent addition to MFC's portfolio, given the high barriers to entry in that region, the high quality of the acquired facility, and MFC's high economic interest."
Mr. Maruoka cited the company's balance sheet flexibility for future mergers and acquisition deals, new CEO Britt Reynold's vision and a strong 5.9-per-cent yield that will benefit further from the U.S. dollar. "We expect additional deals going forward."
The price target increased to $22 from $18. The "buy" rating remains unchanged. The consensus for the stock is $18.49.
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The long-term outlook may be strong for energy drink purveyor Monster Beverage Corp (MNST-Q), but the "near-term upside potential is more limited," say Wells Fargo analyst Bonnie Herzog.
He expects second-quarter results in the U.S. to be soft (estimated 4.3 per cent sales growth). "We attribute Q2 weakness to: poor weather; recent MNST price increases/lower promos; and share losses to more heavily promoted brands."
Other factors for the ratings downgrade to "market perform" from "outperform" include new products Hydro and Mutant hitting shelves later than expected in the fourth quarter; international sales challenged by events like Brexit, a slower launch in China; and the stock underperforming.
"We believe its valuation is likely at or near peak levels," say Ms. Herzog.
Her valuation estimate on the stock, which is unchanged, ranges between $164-$166 (U.S.). The average analyst price target is $163.93.
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According to financial markets, Nintendo Co. Ltd. might be more of a mobile gaming company than a seller of gaming consoles. And that's a sign the Pokémon Go-fuelled rally in the stock might have gone too far, according to Deutsche Bank AG.
Since the launch of its viral, battery-draining hit augmented reality game in the U.S. earlier this month, shares of Nintendo have gone parabolic.
"Pokémon Go is a genuine phenomenon − just after little over a week, it has added $19-billion (U.S.) to the value of Nintendo," writes Deutsche Bank analyst Han Joon Kim. "The market is now valuing Nintendo at $27-billion in market capitalization (ex-cash and treasury shares at book value), on a par with global leaders such as Electronic Arts Inc. and Activision Blizzard Inc. that respectively have 5 per cent global video game market share versus Nintendo's current 2 per cent."
As such, amid this frenzy, the stock price now reflects operating and financial performance that will be difficult to realize, he argued.
"We need to see further hard evidence to model in significant further upside," writes Kim, adding that the launch of Pokémon Go in other regions, introduction of new mobile games, and the reception to its new NX console were key events to watch in this regard.
The analyst cut his rating on Nintendo to "hold" from "buy" and upped his price target to 30,000 yen from 23,600 yen.
"We think the stock price now prices in a large portion of the market share recovery story, which we believe is readily achievable from leveraging its intellectual property to some degree," he explains. "Combined with mobile game launches and market share recovery in console via NX, we are willing to model in a market share recovery by FY3/2019 to ~5 per cent, but not towards the 10 per cent level that Nintendo enjoyed in 2009 when Wii revolutionized the game industry."
However, Kim acknowledge that better-than-anticipated monetization of Pokémon Go constituted one of the key upside risks to his call on the stock.
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BMO Nesbitt Burns analyst Alex Arfaei downgraded Merck & Co. Inc. (MRK-N) to "market perform" from "outperform," citing valuation concerns.
"The so called 'TINA' (there is no alternative than equities) effect is not enough for us to remain bullish at these levels; the fundamentals have not improved to justify higher valuations. In fact, we are more cautious as we see elevated risks (particularly on pricing) and limited upside," he said in a note quoted on Benzina.com.
His price target is $62 (U.S.). The analyst consensus price target over the next year is $61.60.
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With a file from Bloomberg News