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Beware the Apple hype, analyst warns in rare downgrade

Apple CEO Tim Cook speaks at the Apple Developers Conference in San Francisco, Monday, June 11, 2012.

Paul Sakuma/AP

Here are some of the key analyst actions today

Believing that the euphoria over Apple Inc. is getting a little overdone, Oracle Investment Research analyst Laurence Balter downgraded the tech darling this week to a "hold" rating from a "buy."

"The hype concerns us," Mr. Balter wrote in a note to clients, according to the website Wall St. Cheat Sheet. He compared investor enthusiasm over Apple to the days long ago when Microsoft and Cisco reached their peaks before fizzling out.

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Mr. Balter is particularly concerned about the tough market Apple is entering if it actually does launch its Apple TV product. "We believe entering the low margin world of television set top boxes and TV is fraught with margin danger," Balter wrote. "And will the set top box go on top of the XBOX, next to the DVR or under the DVD Player? Is this the game changer we have all been waiting for?"

Despite the words of caution, the investor love affair with Apple continued Wednesday, with shares closing up 1.9 per cent to $668.87 (U.S.), not far from its all-time peak of $674.99 on Tuesday.

Downside: Mr. Balter cut his price target to $650 (U.S.) from $670.


Dell Inc.

While reporting quarterly earnings in line with expectations, Dell disappointed the Street in forecasting an earnings per share decline of about 20 per cent year-over-year for fiscal 2013, noted RBC Dominion Securities analyst Amit Daryanani. "While some of the headwinds are cyclical in nature, we believe the large and a more secular issue for Dell is faster than anticipated declines in PC's due to growth of Apple products and increased competition from Lenovo. Neither one of those dynamics are likely to ease up in the near term," he said.

Upside: Mr. Daryanani cut his price target by $1 to $14 and maintained a "sector perform-average risk" rating.

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Constellation Software Inc.

Constellation Software has announced the acquisition of SpecTec, an international provider of marine software and remote asset management solutions. The company has now spent a total of $72-million on 19 acquisitions year-to-date, 77 per cent more than all of last year, noted Versant Partners analyst Tom Liston. "Our thesis on this stock is that acquisition activity will continue to accelerate in combination with organic revenue growth on new deal wins," he said.

Upside: Mr. Liston raised his price target to $119 from $107 and maintained a "buy" rating.


Cominar REIT

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Cominar REIT continues to make good progress on its strategic plan of doubling its size by 2016, commented Dundee Securities analyst Brad Cutsey. The REIT this month announced the second big acquisition of the year by acquiring a portfolio of 68 properties from GE Capital Real Estate. The deals should improve the company's economies of scale while building a national platform to grow from, he said.

Upside: Mr. Cutsey raised his price target by 50 cents to $26.50 and reiterated a "buy" rating.


Orocobre Ltd.

Orocobre has acquired Borax Argentina S.A., a producer of boron minerals and chemicals supplying South America, for $8.5 million (U.S.). While the deal may appear as somewhat distracting to Orocobre's lithium-brine focus, in the long run "there may be synergies with ORL's lithium-brine project along with opportunities to expand borate operations and target broader markets in Asia and Europe," said Dundee Securities analyst Mansur Khan.

Upside: Mr. Khan raised his price target by a nickel to $2.85 and reiterated a "buy-high risk" rating.

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