Wednesday’s analyst upgrades and downgrades

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Inside the Market's roundup of some of today's key analyst actions. This file will be updated often during the trading day so check back for new details.

The efforts by BlackBerry Ltd. (BBRY-Q, BB-T) to reignite revenue growth "may not be proceeding quite to plan," said Veritas Investment Research analyst Desmond Lau.

Concerned a turnaround isn't occurring as intended, Mr. Lau downgraded the stock to "sell" from "buy."

On Wednesday, the company reported first-quarter sales of $658-million (U.S.), below the consensus forecast of $694-million, and an adjusted fair disclosure loss per share of 4 cents, a cent more than the consensus estimate.

Mr. Lau pointed to three factors when justifying his sell recommendation:

• Non-licensing software revenue growth. He thought it could be “flat” quarter over quarter based on management commentary, after the company did not reveal how much it grew on a sequential basis.
• Hardware sales trending to less than half of its annual target of 10 million units. He said the goal “is looking unachievable.”
• The need to restate BBM targets after CEO John Chen said in a media interview that the company’s $100-million goal may be too high.

"While BlackBerry's share price is supported by cash and patents, we are seeing less upside in our bull-case scenario," said Mr. Lau. "Failure of the hardware business to regain momentum makes it less likely for an acquirer, such as Lenovo to take over the business, in our opinion."

He lowered his price target to $8.25 (U.S.) from $12. The consensus forecast is now $8.53 (U.S.), according to Bloomberg data.

Other analyst movement on the stock included:

• EVA Dimensions’ Austin Burkett downgraded it to “hold” from “overweight”
• Canaccord Genuity’s T. Michael Walkley dropping his price target to $8 from $10 (U.S.)
• Raymond James’ Stephen Li lowered his target to $11 from $10.25 (U.S.)
• BMO Nesbitt Burns’ Tim Long adjusted his target to $9 from $10 (U.S.)

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Calling Franco-Nevada Corp. (FNV-N, FNV-T) "the premier royalty/streaming company" in the gold sector,  Raymond James analyst Phil Russo upgraded the stock to "outperform" from "market perform."

"We often discuss with investors the appropriate portfolio strategy with the theme for most of 2015 being one of timing the switch from the currently overweight royalty/streaming names, into the higher-levered producing names," said Mr. Russo. "While the strategy has merit today with some opportunities presenting, owning positions in top-tier royalty names such as Franco at opportune levels should form part of the strategy that diversifies and reduces one's overall gold equity volatility."

He noted the stock's valuation has recently dropped from 2.3 times net asset value to a current level of 1.9 times, presenting a "compelling level" for investors. He added: "At 24-per-cent return today, we believe Franco is unlikely to offer a much more compelling entry point in the name – only 10 per cent above its trailing 52 week low.

Mr. Russo touted Franco-Nevada`s diverse portfolio, calling it the best among its peers. He said the stock provides investors with leverage to commodities without operational and capital risks. Holding $850-million (U.S.) in liquidity and no debt, he expects further diversification.

"We believe those clients owning a basket of gold stocks are well served including positions in preferred royalty/streamer names of which, given the pullback in its valuation, Franco currently offers an opportune time to build positions in a premium name," said Mr. Russo. "We expect the recent valuation divide to be short lived for Franco given its premier investment case, centering on lower overall revenue and cash flow risk – a desired profile for investors as commodity markets provide ongoing pricing uncertainty."

Mr. Russo also increased his target price to $60 from $58 (U.S.). The analyst consensus price is $58.12, according to Thomson Reuters.

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Carnival Corp. (CCL-N) remains No. 1 in the cruising industry's "pecking order," according Credit Suisse analyst Joel Simkins.

The company reported second-quarter 2015 adjusted earnings per share of 25 cents, compared to Mr. Simkins's forecast of 15 cents and the 16-cent consensus,

"CCL's operational execution continues to outweigh headwinds from currency," he said. "We are encouraged by net yield growth of 4 per cent year over year (versus guidance of 2-to-3 per cent) as CCL is executing on its firm commitments around pricing."

He added: "Two years into the job, we think Arnold Donald has proven he can make considerable changes to the organization and that the turnaround is firing on all cylinders. In our view, the Carnival and Costa brands have improved considerably, while announcements such as Fathom and LNG powered ships highlight that the company is thinking outside of the box. Over the next few years, we think CCL will continue to create shareholder value through initiatives such as improving its dynamic pricing system and promoting regional price coordination between its brands."

Mr. Simkins raised his 2016 EPS estimate to $3.38 from $3.20 (U.S.) and 2017 to $3.91 from $3.73.

The analyst maintained his "outperform" rating for the stock while raising his price target to $58 from $55 (U.S.). Consensus is $52.37.

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Desjardins Securities analyst Benoit Poirier suggested investors wait for a pullback in share price for Stella-Jones Inc. (SJ-T) before buying.

Though he touts the company as "a dominant player in North America for treated wood utility poles and railway ties," Mr. Poirier thinks the current valuation properly reflects the company's strengths, which include its business model, "impressive" growth profile and "consistent" track record.

"The stock has risen more than tenfold since 2009," he said. "We believe these impressive returns have been driven by the company's strong organic growth, track record for effectively integrating transformative (as well as tuckin) acquisitions and exceptional focus on maintaining a low-cost culture, which have also buoyed the company's valuation metrics in recent years, with forward P/E and EV/EBITDA multiples close to record levels. From a fundamental perspective, demand for railway ties has steadily increased since 2009, largely driven by the significant capex increase from Class I railroads while demand for treated wood utility poles is poised for significant upside, largely driven by a strong replacement cycle."

Mr. Poirier initiated coverage of the company with a "hold" rating and price target of $44 (Canadian).  Consensus is $48.10.

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Though he is confident Darden Restaurants Inc. (DRI-N) has the ability to deliver on its above-consensus guidance for the 2016 fiscal year, BMO Nesbitt Burns analyst Andrew Strelzik sees "limited near-term upside" and advises shareholders to utilize any gains from the stock's recent gains for "more attractive opportunities."

The company reported fourth-quarter 2015 earnings per share of $1.08 (U.S.), ahead of the consensus by 15 cents. It also introduced 2016 EPS guidance of $3.05-$3.20. Mr. Strelzik said the company`s progress on costs savings provides "confidence" in its ability to deliver on that forecast.

Darden also announced it plans to separate a portion of the company into a publically traded real estate investment trust.

"Holding DRI's stock through the REIT spin-off creates risk related to how the REIT will trade post-spin and current DRI investors could limit the risk by locking in gains at the current stock price," he said. "Although there is a growth strategy underlying DRI's REIT, there is potential risk around how the REIT will be received given the plethora of alternative REIT investments, the relatively smaller size of the REIT in the context of REIT investment alternatives, potentially rising interest rates that could shift sentiment toward triple net leases, and the REIT's potentially elevated leverage levels."

He maintained his "market perform" rating while raising his price target to $72 from $65 (U.S.) to reflect the value of the stock including the REIT. Consensus is $70.50.

Meanwhile, Morgan Stanley's John Glass raised his target to $72 from $67, and RBC Securities' David Palmer bumped his target to $74 from $70.

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In other analyst action:

Electronic Arts Inc (EA-Q) was raised to "buy" from "hold" at Jefferies by equity analyst Brian Pitz. The 12-month target price is $80 (U.S.) per share.

Fortinet Inc (FTNT-Q) was downgraded to "neutral" from "outperform" at Robert Baird by equity analyst Jayson Noland. The 12-month target price is $46 (U.S.) per share.

Humana Inc (HUM-N) was rated new "sector perform" at RBC Capital by equity analyst Frank Morgan. The 12-month target price is $221 (U.S.) per share.

Take-Two Interactive Software Inc (TTWO-Q) was raised to "buy" from "hold" at Jefferies by equity analyst Brian Fitzgerald. The 12-month target price is $35 (U.S.) per share.

Raymond James downgraded Tree Island Steel (TSL-T) to "outperform" from "strong buy" and raised its price target to $4 (Canadian) from $3.25.

Deutsche Bank downgraded Citibank (C-N) to "hold" from "buy" with a price target of $56 (U.S.).

Deutsche Bank downgraded Goldman Sachs (GS-N) to "hold" from "buy" with a price target of $206 (U.S.).

Goldman Sachs downgraded General Motors (GM-N) to "neutral" from "buy" and cut its price target to $40 (U.S.) from $47.

Goldman Sachs upgraded Ford (F-N) to "buy" from "neutral" and raised its price target to $19 (U.S.) from $18.

GDI Integrated Facility Services Inc (GDI-T) was rated new "Buy" at TD Securities. The 12-month target price is $23 (Canadian) per share.

Aetna Inc. (AET-N) was rated new "Sector Perform" at RBC Capital. The 12-month target price is $159 (U.S.) per share.

Anthem Inc. (ANTM-N) was rated new "Outperform" at RBC Capital by equity analyst Frank Morgan. The 12-month target price is $222 (U.S.) per share.

Arrow Electronics Inc. (ARW-N) was raised to "Buy" from "Hold" at Cross by equity analyst Steven Fox. The 12-month target price is $75 (U.S.) per share.

Avnet Inc. (AVT-N) was raised to "Buy" from "Hold" at Cross. The 12-month target price is $53 (U.S.) per share.

With files from Bloomberg News