These are some of the key analyst actions on the Street today. For more actions and investing news and insight, follow Darcy Keith on Twitter at #eyeonequities
Smartphones and tablets are flying off store shelves, while PCs have often been left to collect dust.
That growing trend is now the bane of chipmakers’ existence and isn’t showing much sign of reversing.
Even with the Windows 8 launch, which was expected to be a boon to the industry, Citigroup today said chip demand isn’t seeing much upward traction. It downgraded three of the giants in the business to “neutral” from “buy”: Intel Corp., Advanced Micro Devices Inc. and Nvidia Corp.
“While these names are down noticeably in recent days, prompted by a noticeably weak August and punctuated by Intel’s recent pre-announcement, our downgrade today reflects our checks in Asia that stoke our concerns that the intermediate term prospects for PC’s do not look optimistic,” said Citi analyst Glen Yeung. “Robbed of catalysts, we see limited likelihood PC-related shares will appreciate meaningfully in coming months, despite valuations.”
Intel lowered his own outlook last week, citing weak PC demand.
For 2013, Mr. Yeung now sees PC units shrinking 1 per cent (he had earlier seen 4 per cent growth).
Mr. Yeung cut his price targets on all three stocks: Intel’s target went to $25.75 from $32; AMD’s was cut to $4.25 from $6.50; and Nvidia was cut to $15.25 from $16.50. He also cut his price target on Marvell Technology Group to $11.50 from $14, leaving his “neutral” rating on that stock unchanged.
Yeung still sees the new Windows product possibly boosting demand when launched later this year. But he sees several factors, including high licensing fees, as limiting its success.
“After an initial build recovery in September and October, we suspect PC-related builds will again soften from November onward,” Yeung said, adding that he expects Wall Street’s consensus estimates to fall in the coming months as well.
Western Potash Corp.
Salman Partners has downgraded Western Potash Corp. to “sell” from “hold,” believing the company will have difficulty in attracting a new partner for its Milestone Potash Project in Saskatchewan after late-stage discussions with a Chinese firm fell through this summer.
“Though management states that WPX is conducting discussions with other parties, these all appear to be at a significantly earlier stage,” said Salman analyst Andrea Rubakovic. She thinks a deal would be difficult because of the project’s hefty $3.3-billion pricetag and risks that there will be an oversupply of potash projects in Saskatchewan. With cash on its balance sheet dwindling, she thinks the company may launch an equity offering that could dilute shareholder value.
Downside: Ms. Rubakovic slashed her price target to 55 cents from $1.15.
Alimentation Couche-Tard Inc.
Alimentation Couche-Tard reported solid quarterly results that were inline with forecasts, but CIBC World Markets analyst Perry Caicco is increasingly concerned about the contributions that will come from its recent acquisition of Statoil’s retail operations in Norway. “The economic situation in Europe adds a significant layer of uncertainty,” and financial results there will be tough for observers to gauge given a general unfamiliarity with the assets, he said.
Upside: Mr. Caicco cut his price target by $1 to $52 and downgraded the stock to “sector performer.”
Panoro Minerals Ltd.
Panoro Minerals released a new resource for its Cotabambas project in Peru that doubled contained copper-gold estimates and included a new silver resource. The results could potentially enhance the economics of the project, and while primarily a copper deposit, the gold and silver resources are also significant and could be a potential source for project financing, said M Parners analyst Ingrid Rico.
Upside: Ms. Rico raised her price target by 20 cents to $1.40 and reiterated a “buy” rating.
National Bank Financial has added Boralex Inc. to its list of favourite investing ideas, commenting that the renewable energy producer has been left behind by peers that now trade close to all-time highs. The stock now trades at only 1 times price-to-tangible book value, and “the lack of dividend at BLX may be to blame,” said analyst Rupert Merer. He notes a new Quebec wind farm is expected to start up next year and the company could initiate a dividend using the extra cash flow.
Upside: Mr. Merer raised his price target by 50 cents to $11.50 and reiterated an “outperform” rating.