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Analysts revoke buy ratings on Iamgold as stock plunges 11%

Iamgold’s Yatela mine in Mali

Iamgold

Inside the Market's roundup of some of today's key analyst actions

Iamgold Corp. shares are down more than 11 per cent in mid-afternoon trading after production came up shy of the company's 2012 guidance and -- more worrisome -- it forecast higher operating costs.

The results, released after markets closed on Tuesday, prompted a snap downgrade from Clarus Securities analyst Nana Sangmuah, who now rates Iamgold as a "hold" instead of a "buy" and sliced his price target to $19.50 from $23.

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"We realize that there is potential upside to our net asset value (estimate) of $19.50 at current price levels," Mr. Sangmuah said in a research note. "However, we are moving our recommendation to a hold as we foresee risk ahead in the commissioning of Westwood, optimizing Cote Gold and a huge capital expenditure commitment over the near-term to maintain production levels that could impact the company's balance sheet and prevent it from undertaking other growth objectives."

Westwood is a development project in Quebec. Cote Gold is in Ontario where the company concurrently released an updated resource estimate that showed indicated resources more than doubling.

BMO Nesbitt Burns analyst David Haughton also downgraded the stock to a "hold" and cut his target price to $14 from $16 (Canadian). Canaccord Genuity analyst Steven Butler downgraded the stock to a "market perform" from "outperform" and reduced his target to $14 (U.S.) from $16.

Mr. Haughton noted that key project feasibility studies are under way at Rosebel (due in the first quarter of this year) and Niobec (due in the third quarter). Once released, they could improve the outlook for the company.

But for now, analysts are urging caution after the company forecast cash costs will be $850 to $925 an ounce this year. In 2012, the company indicated costs were within 3 per cent of the upper end of a range of $670 to $695 it had forecast last August.

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RBC Dominion Securities analyst Sam Crittenden upgraded Platinum Group Metals Ltd. to "outperform" from "sector perform." He's encouraged by the company's "high-quality" Western Bushfeld joint venture project in South Africa that is expected to start production in 2014. He also believes "positive" fundamentals for platinum and palladium should drive gains in the stock.

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Upside: Mr. Crittenden raised his price target to $1.75 from $1.50.

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Analysts are jacking up their price targets on Canadian National Railway Co. after it reported a solid fourth quarter this week, with earnings matching the Street consensus as revenues rose 6.6 per cent.

The railway also released its 2013 outlook, which calls for high-single digit earnings per share growth. Given that consensus views had pegged EPS growth at about 10 per cent year-over year, the guidance may have been slightly underwhelming. But "based on CN's habit of under-promising and over-delivering, we view any weakness as a buying opportunity," said Desjardins Securities analyst Benoit Poirier.

Upside: Desjardins hiked its price target to $102 from $94 (Canadian) and maintained a "buy" rating, while Canaccord Genuity boosted its target to $101 from $96 and reiterated a "hold" rating.

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With subscriber momentum "clearly in its favour" and a big lead in selling 4G devices, Verizon Communicaitons Inc.'s wireless business is stronger than ever before and 2013 margins in that business should at least be a record-setting 49-50 per cent, said Canaccord Genuity analyst Greg Miller.

"Although the stock currently traders at the higher end of its historic valuation range, we believe the improving outlook and a steady dividend yield of 4.8 per cent can easily justify a slight premium," he said.

Upside: Mr. Miller upgraded Verizon to a "buy" rating and raised his price target to $50 (U.S.).

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Canaccord Genuity analyst Michael Graham believes Google Inc. stock should continue to drift higher after the Internet giant posted solid fourth-quarter results on Tuesday.

Although the results were mostly in line with consensus estimates, they "prompted a sigh of relief from investors nervous after a few bumpy quarters," he said. The next key question is whether better pricing, product listing ads, and display can help growth in Google sites "inflect upward."

Upside: Mr. Graham raised his price target to $830 from $810 and reiterated a "buy" rating. RBC Dominion Securities also raised its target by $20 to $840 and maintained an "outperform" rating.

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For more analyst actions, breaking investing news and analysis, follow Darcy Keith on Twitter at @eyeonequities

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About the Author
Investment Editor

Darcy Keith is The Globe and Mail's Investment Editor. He has been a business journalist since 1992 and joined the Report on Business in 2010 from Yahoo! Canada, where he was the senior editor of finance. More

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