A Bay Street sign is seen in the financial district of Toronto on June 2, 2014.Mark Blinch/The Globe and Mail
Inside the Market's roundup of some of today's key analyst actions. This file will be updated during the trading day.
Desjardins Securities says it is "more constructive" on the group of Canadian asset managers as a result of recent price weakness.
Volatile equity markets have dragged down asset manager stocks, resulting in a negative third quarter for the space, analyst Gary Ho said. Shares of the companies under coverage have declined by an average of about 15 per cent since the end of June, he said.
"Our concerns over increased competition from the banks and more stringent regulatory oversight around fees and fee disclosure remain top of mind," Mr. Ho said. "However, we view some of these industry headwinds as partially/fully priced in."
IGM Financial Inc.'s shares have lagged the group so far this year, opening up a buying opportunity for a stock with a 4.9-per-cent dividend yield, he said. "Expectations for a fee cut at IGM are priced in, in our view. If a cut does not materialize, this presents a good trading opportunity over the near term."
He upgraded IGM to "buy" from "hold," and lowered his target price to $53 (Canadian) from $56.
His top picks remain CI Financial Corp., which he cut to a $40 target price from $41, and Gluskin Sheff + Associates Inc., which he lowered to $34 from $37.
He also cut his targets on Sprott Inc., to $2.75 from $3.25, and AGF Management Ltd., to $10.50 from $12, while maintaining "hold" ratings on both.
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After beginning trading with the biggest initial public offering in history, Alibaba Group Holding Ltd.'s shares have risen by 44 per cent, which is not enough to deter several analysts, who initiated coverage of the stock today with favourable recommendations.
"Revenue growth, combined with the incomparable scalability – it is the largest e-commerce ecosystem in the world – and operating leverage should help the company deliver sustainable earnings in the coming years," Credit Suisse analyst Dick Wei said. "We expect Alibaba Group to become even more influential in China as the e-commerce sector maintains decent growth, and becomes an integral part of the daily life," Mr. Wei said.
He rated the stock "outperform" at a target price of $114 (U.S.).
The following firms also initiated coverage of Alibaba with the equivalent of buy ratings, according to Bloomberg: Deutsche Bank, at a target price of $112.70, RBC Dominion Securities at $120, BNP Paribas at $113, Stifel at $112, Raymond James at $115, and Nomura at $120.
One bank, however, initiated coverage with a more cautious "hold" rating and $102 price target.
Goldman analyst Piyush Mubayi sees strong potential for the company in the years ahead, but believes the stock already reflects the shorter-term outlook. "Near-term prospects appear well discounted ... however, with steady growth, we estimate equity value could appreciate to $133/share in two years, or a $350-billion market capitalization," StreetInsider.com quoted him as saying.
According to the latest Bloomberg data, there are now 27 buys on the stock, 3 holds and 2 sells. The average target is $108.17.
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TD Securities analyst Scott Treadwell downgraded Horizon North Logistics Inc. after quarterly results that missed by a wide margin.
Horizon's third-quarter 2014 revenue of $121.9-million missed both TD's $136.7-million estimate and consensus at $130.4-million, while earnings before interest, taxes, debt and amortization of $26-million came in well below TD's $33.4-million estimate and consensus at $32-million.
"Given the substantial miss on EBITDA on both consensus estimates and company guidance, we have materially reduced our estimates and would not advocate for an elevated multiple until the company can execute on the relatively low expectations in front of it," said Mr. Treadwell. He suspects that Horizon's management had an opportunity to update its forecast, but chose not to do so.
Mr. Treadwell lowered his rating to "hold" from "buy" and cut his price target by a dollar to $5 (Canadian). The analyst consensus price target is $6.63, according to Thomson Reuters.
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The ongoing growth of the oil sands and natural resource development in Alberta should continue to benefit Canadian Utilities Ltd., Credit Suisse analyst Paul Tan said as he initiated coverage on the stock with an "outperform" rating and $46 (Canadian) price target.
"The recent growth in CU's financials is driven largely from its organic utility segment growth, owing primarily to the continued natural resource development in the province of Alberta," Mr. Tan said in a research note. "CU should continue to benefit from the continued growth of this natural resource for the foreseeable future. Another positive outcome has been the greater proportion of earnings coming from a more stable source. We believe this organic growth will translate into continued earnings and dividend growth."
He also thinks the company can benefit from natural resources growth in Western Australia and the planned National Infrastructure Program being implemented in Mexico.
The analyst consensus price target for Canadian Utilities over the next year is $43.86, according to Thomson Reuters data.
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Norbord Inc.'s outlook has deteriorated as a result of weak prices for oriented strand board (OSB) combined with higher debt, Raymond James analyst Daryl Swetlishoff said.
The company is coming off a third-quarter earnings announcement that fell short of analyst expectations, while the company declared an unchanged quarterly dividend.
"While management has indicated the current dividend will be maintained for 2014, we reiterate our view that current OSB prices are insufficient to fund it and, should the commodity not improve materially, we could see a dividend cut in 2015," Mr. Swetlishoff said.
His outlook for the stock is also limited by a conservative outlook for U.S. housing starts, he said. "Should U.S. housing markets outpace our forecasts, we highlight OSB producers such as Norbord as among the greatest beneficiaries."
He lowered his target price on Norbord to $24 (Canadian) from $26.25, while reiterating a "market perform" rating. The analyst consensus price target over the next year is $26.10.
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TD Securities downgraded Horizon North Logistics to "hold" from "buy" and cut its price target to $5 (Canadian) from $6.
Raymond James cut its price target on Precision Drilling to $13.25 (Canadian) from $16 but maintained a "strong buy" rating.
Morgan Stanley initiated coverage on Amazon with an "overweight" rating and $420 (U.S.) price target. It also added Amazon to its Best Ideas list.
Citibank resumed coverage on Yahoo with a "buy" rating and $63 (U.S.) price target, up from its last target of $46.
(Note to readers: Earlier versions of this story stated incorrect price targets by Desjardins on the Canadian asset managers.)
Tim Shufelt