Inside the Market's roundup of some of today's key analyst actions. This file will be updated during the trading day.
A number of trends are coming together to make Air Canada "an investment opportunity seldom seen," said RBC Dominion Securities analyst Walter Spracklin today as he significantly raised his price target to $17 (Canadian) from $12.
He reaffirmed his "outperform" rating, and there is now another analyst on the Street also recommending the stock: National Bank Financial's Cameron Doerksen upgraded his rating today to "outperform." Mr. Doerksen also raised his price target, to $12 from $8.50.
While Mr. Spracklin's new $17 target is already one of the highest on the Street, he thinks if things come together just right for the airline, the stock could hit $30 in the foreseeable future.
"AC is undergoing a fundamental and structural cost reduction initiative that is playing out in a climate of steadily increasing demand for air travel and competitive discipline. Added to this is the significant positive operating leverage resulting from these trends combined with fundamentally undervalued shares - all of which form an investment opportunity seldom seen," Mr. Spracklin said.
"When AC provided its capacity guidance last year calling for material (high-single digit) capacity growth, we took the conservative approach that traffic growth would not match the capacity growth and that traffic would come at a lower yield. Even under those assumptions, the stock was very attractively valued in our view. Now, however, it is clear that our assumptions are too conservative: 1) we have underestimated the demand environment; 2) yields have held steady and have not declined as anticipated; and 3) cost reductions are coming in better and quicker than forecasted. Accordingly,we have had to revise these assumptions higher," he added.
"Even under what remain in our view conservative assumptions, the stock is trading at an EV/EBITDAR multiple of 4.3x vs. a peer average of 5.7x. We are increasing our multiple to 5.2x (from 5x, and still a discount to peers), which together with our estimate changes, results in our new price target of $17. If we were to consider better-than-expected trends vs. our current assumptions, our upside scenario would be $30. AC shares accordingly represent one of the best opportunities in our coverage universe today," he said.
Uranium miner Cameco Corp. has received a ratings upgrade from Canaccord Genuity analyst Gary Lampard, but that's pretty much where the good news ends.
The global uranium market has been in decline for five years, and Mr. Lampard says there is little reason to expect a near-term trend reversal.
"Recent uranium price weakness reflects our view of poor uranium market fundamentals," he says in a research note. "While we do not expect further material price weakness from current spot $28.63 (U.S.) per pound, we expect the market to remain in surplus until the end of the decade."
Mr. Lampard sees potential fundamental support for Cameco shares at the $17- to $20-level, but admits more analysis of potential further downside is needed.
Mr. Lampard is upgrading Cameco to "hold" from "sell" and lowering his price target to $20 from $22 (Canadian).
In other analyst actions:
National Bank Financial upgraded WestJet Airlines to "outperform" from "sector perform" and raised its price target to $29 (Canadian) from $27.
Canaccord Genuity downgraded Capstone Mining to "outperform" from "strong buy" and cut its price target to $3.75 (Canadian) from $4.
Desjardins Securities hiked its price target on Saputo to $64 (Canadian) from $58 and affirmed its "buy" rating. CIBC World Markets raised its target to $62 from $53 and maintained a "sector performer" rating.
RBC Dominion Securities hiked its price target on AutoCanada to $91 (Canadian) from $74 and affirmed a "sector perform" rating.
Merrill Lynch upgraded Joy Global to "buy" from "neutral" with a price target of $70 (U.S.).
BMO Nesbitt Burns upgraded Entergy to "outperform" from "market perform" with a price target of $89 (U.S.).
UBS raised its price target on McGraw Hill to $94 (U.S.) from $86 and maintained a "buy" rating.
BB&T Capital downgraded Tyson to "hold" from "buy" and removed its price target, which previously was $44 (U.S.).
Wells Fargo downgraded Apache to "market perform" from "outperform" and cut its valuation range to $95-$105 from $116-$120.
Wells Fargo downgraded Swift Energy to "market perform" from "outperform" and cut its valuation range to $11-$13 from $14-$17.