General Motors Corp. stock sold off last week after the auto giant provided guidance for the fourth quarter that was below Street expectations. But RBC Dominion Securities Inc. analyst Seth Weber believes investors may be punishing the company too much, noting that it's in a significantly better position, especially in North America, than it was a year ago.
Macro-economic uncertainty in Europe and elsewhere is a concern. But he thinks the stock is going cheap, pointing to the fact that GM holds the equivalent of $19 in cash per share - almost the entire stock price.
"We continue to believe that the stock is discounting too dire an economic outlook and see a favorable risk/reward," Mr. Weber said in a research note.
While there is still work to be done in Europe and South America and the recovery could be bumpy, "we still see potential for solid earnings growth ahead even in a modest economic recovery scenario," he said.
Upside: Mr. Weber reiterated his "outperform-average risk" rating, but lowered his price target by $3 to $36.
Student Transportation Inc. , North America's third largest school bus contractor, reported a greater-than-expected loss in its latest quarter. But Raymond James Ltd. analyst Steve Hansen believes the outlook for the company is still favourable thanks to recent corporate acquisitions and healthy contract wins - and thinks now is an opportune time to buy the stock.
"Kids go to school irrespective of the economic environment, a unique industry attribute that offers incumbent operators a degree of economic immunity and cash flow stability," he wrote in a research note. "In this context, we believe STB's recent share price decline represents an attractive entry point, providing investors with a healthy dividend yield (9.5 per cent) and a compelling 20.6 per cent implied return to our target."
Upside: Mr. Hansen upgraded the stock to "outperform" while maintaining a $6.50 target price.
The risk profile of Catalyst Paper Corp. has deteriorated significantly, warns Dundee Securities Corp. analyst Richard A. Kelertas, who downgraded the stock to a "sell," citing its high debt load, a plunge in market pulp prices and waning newsprint paper demand.
"Even if the company succeeds in somehow weathering the storm in 2012, Catalyst is currently reviewing its overly leveraged capital structure, which could mean significant dilution to current shareholders or worse," Mr. Kelertas wrote in a note.
Furthermore, he doesn't see many of the markets that Catalyst serves turning around any time soon.
"We forecast that printing and writing paper producers will experience much less of a seasonal boost in demand during the usually strong fall months as both consumer and business confidence levels remain fragile and export markets tank. If demand declines accelerate further (absent any more capacity closures) we will witness significant downward pressure on most printing and writing paper grade prices towards the end of the year."
Downside: Mr. Kelertas cut his price target by 10 cents, to a nickel.
RBC Dominion Securities Inc. analyst Geoffrey Kwan has downgraded Onex Corp. to "sector perform" from "outperform" due to share price appreciation. While the stock may still be attractive to those with a longer-term investment horizon, he believes increased macro economic concerns may hinder net asset value growth and limit its ability to monetize assets and deploy significant cash through new investments.
Upside: Mr. Kwan raised his price target by $1 to $39.
First Quantum Minerals Ltd. has a track record of reporting earnings below the average Street forecast. Last week, it did so for the seventh consecutive quarter, and "by our reckoning, four of those misses did not even make the range of analyst estimates," said Canaccord Genuity analyst Gary Lampard. He downgraded the stock to "hold" from "buy," calling it "relatively expensive" and "with very high forecasting risk."
Upside: Mr. Lampard maintained a $20 price target.