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.
However, he does not believe the stock is at a point in which a sell-off on the scale of Tuesday, when it fell 32 per cent, is warranted.
"Amaya stock was shellacked following its third-quarter results as financials largely missed consensus and the company took down its 2015 guidance. Weakness in revenue and EBITDA was largely driven by erosion in poker which was impacted by currency and while casino showed 29.7 per cent quarter-over-quarter growth it did not meet our estimates for the quarter," said Mr. Wright. "While we see some challenges ahead for the stock as poker continues to see weakness on currency and casino and sportsbook are both seeing delays, we do not consider a 32-per-cent drop in value as appropriate for a market leader in online poker with growth opportunities from new poker variants, new gaming verticals and new jurisdictions. Management has work to do to win back shareholders, but in our view the stock is compelling near its deal price for the acquisition of PokerStars in 2014."
Mr. Wright emphasized the "meaningful" decline in the company's poker business. However, he did point out that the segment grew 4.5 per cent on a constant currency basis with 1.85 million new customers.
"While the bears will argue that poker is facing significant erosion, we believe that markets like Italy, France and Spain at slightly negative year-over-year declines indicate otherwise," said Mr. Wright, who pointed out a 29.7-per-cent growth in its casino business "indicates that the company can show success in cross sell."
He said improved disclosure could help the stock going forward.
"In our view the PokerStars story should be simple to understand given its leadership in poker market share and opportunity for growth in casino, sportsbook and new jurisdictions," the analyst said. "However, we struggle with modelling the impact of currency on poker and have little visibility into KPIs. In our view this uncertainty is contributing to volatility in the stock and increased disclosure would be viewed as an investment positive for the stock."
Maintaining his "buy" rating for the stock, the analyst lowered his target price to $42 from $48. The analyst average is $37.56, according to Bloomberg.
His earnings per share estimates for 2015 and 2016 fell to $1.72 and $2.33 from $1.97 and $2.70, respectively.
"On weak performance in the core poker business, decreased 2015E guidance, and delays in the casino and sports products, we have lowered our estimates for the remainder of this year and for 2016," he said. "This has informed our target price change. Amaya is expected to release 2016 guidance with its [fourth quarter] results."
Meanwhile, Cormark Securities analyst David McFadgen downgraded the stock to "buy" from "top pick" and lowered his target to $23.50 from $37.
Noting its organic growth was in focus in the third quarter, Raymond James analyst Michael Overvelde upgraded Element Financial Corp. (EFN-T) to "strong buy" from "outperform."
"We believe Element features a rare combination of high earnings growth, earnings predictability and M&A optionality, and we are attracted to the inherently high profitability and stability of its market-leading North American fleet management business," said Mr. Overvelde.
Element reported quarterly adjusted earnings per share of 26 cents, beating the consensus projection of 25 cents and in-line with the analyst's estimate. He noted, relative to his forecasts, lower-than-expected fee income, particularly from volatile capital advisory fees, was offset by lower-than-expected operating expenses.
His target price of $24, projecting a 46-per-cent upside, remained unchanged. The analyst average is $24.77.
Macquarie Capital Markets analyst Brian Bagnell said he continues to like PrairieSky Royalty Ltd. (PSK-T) as a long-term investment and a core holding for energy investors.
However, Mr. Bagnell downgraded his rating for the stock to "neutral" from "outperform."
"The downgrade is largely due to a combination of valuation, our lower 2016 [estimated] royalty production on PSK's pre-deal assets, the risk of a dividend cut in February, and a relative lack of visible near-term catalysts other than higher commodity prices," he said. "There is also some potential for an equity overhang from the shares owned by Canadian Natural Resources."
PrairieSky has entered into an agreement with Canadian Natural Sources to purchase its third-party royal business for $1.8-billion in cash and shares. The assets include 5.4 million acres of royalty lands, included 2.2 million acres of fee lands. The deal is expected to close by the end of 2015.
"The acquisition gives PrairieSky additional scale and scope of offerings to prospective lessees, especially in plays that are economic even at current commodity prices, such as the Viking, Spirit River, and Montney," said Mr. Bagnell, who called the deal "positive" in the long term. "The pro-forma entity also provides more upside to commodity prices as activity ramps back up in other plays that may be marginally (or not) economic today."
Yet the analyst did say the royalty production outlook is negative.
He reduced his target price for the stock to $26.50 from $29.50. The average is $30.34.
"No other companies within our universe offer the same ability to generate free cash flow without spending cash of its own, especially on such a large scale," he said. "Furthermore, the stock should remain relatively defensive in a weak commodity price environment with no debt and a healthy cash balance (approximately $203-million as of Sept. 30). Its defensive profile would be further bolstered if it moves to cut the dividend and reduces its payout ratio back below 100 per cent. Over time, we are confident that PrairieSky will be able to show material growth in royalty production from its huge fee simple land base as commodity prices recover to more reasonable levels. We think that it should continue to be a core holding in Canadian energy portfolios, though we think that shorter term upside is limited."
Calian Technologies Ltd. (CTY-T) has shown "stronger" organic growth potential and has an attractive valuation, according to Desjardins Securities analyst Benoit Poirier.
Following the release of its fourth-quarter results, Mr. Poirier upgraded his rating for the stock to "buy" from "hold."
"Calian reported solid fourth quarter 2015 results, with a strong EBIT margin offsetting weak revenue," he said. "Management also introduced stronger-than-expected fiscal year 2016 guidance, reflecting the recent stabilization of traditional markets and the organic growth opportunities across all of CTY's business lines. Overall, in light of the recent share price decline (down 19 per cent since Aug. 6), the sustainable 7.5-per-cent dividend yield, pristine balance sheet and stronger organic growth prospects, we are upgrading Calian."
Calian reported adjusted earnings per share of 43 cents, beating the analyst's forecast of 35 cents, while its revenue of $61-million, an increase of 12 per cent year over year, fell just below Mr. Poirier's projection of $63-million. Consolidated earnings before interest and taxes margin of 6.5 per cent beat his 5.7-per-cent forecast.
The analyst said: "CTY also unveiled stronger-than-expected revenue guidance for [the 2016 fiscal year] of $250- to $280-million (we expected $251-million) as a result of the stabilization of traditional markets and the company's confidence that it can achieve revenue and earnings growth across most of its service lines. As management believes current margins are sustainable going forward, the company's adjusted EPS guidance of $1.49 to $1.79 also beat our initial forecast of $1.46."
Mr. Poirier raised his target price for the stock by a loonie to $20. The analyst consensus is $19, according to Thomson Reuters.
In reaction to a share price decline of 24 per cent thus far in 2015, Credit Suisse analyst Paul Tan reinstated coverage of Enbridge Income Fund Holdings Inc. (ENF-T) with an "outperform" rating.
Prior to a research restriction, his rating had been "neutral."
"ENF maintains 10-per-cent annual dividend growth guidance until 2019 that is on the higher end of the spectrum in our coverage universe," he said. "That dividend growth is primarily supported by the roughly $12-billion organic growth pipeline in the liquids segment."
He maintained a target price of $40. The analyst consensus is $40.50.
Despite a lack of movement in the share price of McDonald's Corp (MCD-N) following its much-hyped investor day on Tuesday, Credit Suisse analyst James West said he came away "positive on the near-term and long-term outlook and note that expectations were high going into the meeting."
He said the company's announcement of $10-billion (U.S.) upside on 2016 buybacks, increased selling, general and administrative expenses (SG&A) targets by 67 per cent and a rise in refranchising targets all topped his current model forecasts.
"As expected, MCD did not guide on current quarter same-store sales (SSS), but the tone was clearly positive as the U.S. and key international markets continue to build momentum," he said. "MCD noted that U.S. SSS have outpaced the industry so far in October (versus a negative 6 per cent sales gap in the first half of 2015), which implies U.S. SSS are likely at least [approximately] 4 per cent in the month, if not higher.(We're modelling U.S. 4Q SSS at +2.0 per cent.) Management. also decided not to pursue a REIT, after a thorough evaluation, a decision we agree with and one that was generally in line with market expectations."
He said the results of the company's announcements "should be sufficient to keep investors engaged" until the release of fourth-quarter results in January.
Maintaining his "outperform" rating, he raised his target price for the stock to $128 (U.S.) from $118, saying "the positive elements of MCD's story continue to line up."
The analyst average is $117.40.
In other analyst actions:
Norbord Inc. (NBD-T) was raised to a "top pick" from an outperform recommendation at RBC Capital Markets. The analyst raised his target price to $38 from $32. According to Bloomberg, there are currently three buy recommendations and four hold recommendations with the average one-year price target at $29.46, implying a potential price return of 12 per cent.
Piper Jaffray reiterated a "neutral" rating on Westport Innovations (WPRT-Q), and cut the price target to $3 (U.S.) from $4.50.
TD Securities maintained a "Buy" rating on Valeant Pharmaceuticals International Inc. (VRX-T) but lowered its price target to $160 (U.S.) from $260. Analyst Lennox Gibbs lowered his fourth quarter earnings per share estimate to $3.74 from $4.11 and his full year EPS to $16.16 from $16.84 to reflect the business disruptions triggered by the discontinuation of its Philidor relationship.
Apple Hospitality REIT Inc (APLE-N) was downgraded to "neutral" from "buy" at Ladenburg Thalmann by equity analyst Daniel Donlan.
CubeSmart (CUBE-N) was rated new "buy" at BB&T Capital by equity analyst David Toti. The 12-month target price is $32.50 (U.S.) per share.
EMC Corp (EMC-N) was downgraded to "market perform" from "outperform" at Wells Fargo by equity analyst Maynard Um.
Etsy Inc (ETSY-Q) was raised to "neutral" from "sell" at Monness Crespi by equity analyst James Cakmak.
Lennox International Inc (LII-N) was downgraded to "neutral" from "overweight" at JPMorgan by equity analyst Steve Tusa. The 18-month target price is $134 (U.S.) per share.
Norbord Inc (NBD-T) was raised to "top pick" from "outperform" at RBC Capital by equity analyst Paul Quinn. The 12-month target price is $38 (Canadian) per share.
Northland Power Inc (NPI-T) was downgraded to "market perform" from "outperform" at FirstEnergy Capital by equity analyst Steven Paget. The 12-month target price is $18.50 (Canadian) per share.
Painted Pony Petroleum Ltd (PPY-T) was raised to "action list buy" from "buy" at TD Securities by equity analyst Juan Jarrah. The 12-month target price is $12 (Canadian) per share.
Public Storage (PSA-N) was rated new "underweight" at BB&T Capital by equity analyst David Toti. The 12-month target price is $217.50 (U.S.) per share.
Pure Storage Inc (PSTG-N) was rated new "neutral" at Sterne Agee CRT by equity analyst Alex Kurtz. The 12-month target price is $20 (U.S.) per share.
Redline Communications Group Inc (RDL-T) was downgraded to "market perform" from "buy" at Cormark Securities by equity analyst Richard Tse. The 12- month target price is $3 (Canadian) per share.
Street Capital Group Inc (SCB-T) was downgraded to "buy" from "strong buy" at Industrial Alliance by equity analyst Dylan Steuart. The 12-month target price is $2.50 (Canadian) per share.
TC PipeLines LP (TCP-N) was raised to "buy" from "neutral" at Ladenburg Thalmann by equity analyst Eduardo Seda. The 12-month target price is $67 (U.S.) per share.
Tyco International Plc (TYC-N) was raised to "overweight" from "neutral" at JPMorgan by equity analyst Steve Tusa. The target price is $42 (U.S.) per share.
With files from Bloomberg News