NBF reveals its favourite Big 5 Canadian bank stock

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

Investors looking for the best returns among the big five Canadian banks should load up on shares in Toronto-Dominion Bank, says National Bank Financial analyst Peter Routledge.

TD is National Bank's top bank stock pick right now, in part because it's "quite inexpensive," trading at a 1.3 per cent discount relative to peers, said Mr. Routledge in a research note. That's below its 2.5-year average discount of 0.2 per cent.

But he also likes its "very attractive" personal and commercial banking franchises in both Canada and the United States, which - in this country - has benefited from a two-decade long expansion of household credit. "Moreover, we believe investors have shunned the stock over the past several months on concerns that TD would make a dilutive U.S. acquisition, a risk that we see receding."

Mr. Routledge prefers banks like TD that have viable personal and commercial banking platforms both here and outside of Canada. That's because there's evidence that Canadian households are finding it increasingly difficult to meet their financial obligations as debt burdens rise.

For instance, Canadian retail sales in December fell 2.1 per cent from November, the worst retail sales performance in nearly three years. The domestic industry could be faced with higher credit card delinquencies, and in the meantime, loan growth in Canada is slowing in the face of declining residential mortgage credit demand.

Mr. Routledge rates TD as "outperform." He also recommends shares in Bank of Nova Scotia, his second pick, applauding the bank's strong execution of business strategies across all segments and geographic diversity. Only Canadian Imperial Bank of Commerce - his last pick of the big 5 - gets an "underperform" rating.

Target: Mr. Routledge has a $94 price target on TD. That's higher than the average analyst target of $91.68, according to Bloomberg data.

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Canaccord Genuity analyst T. Michael Walkley no longer expects Apple Inc. to launch the iPhone 5S this June. Based on his handset market analysis and discussions with suppliers, he now believes Apple will launch the refreshed iPhone this summer or during the third quarter of this calendar year.

Meanwhile, "with a host of impressive recently launched high-end Android smartphones expected to ramp in the second quarter of this calendar year, we believe Apple could lose smartphone market share during the first half of this calendar year and have reduced our Q3/fiscal 2013 iPhone estimates."

But believes Apple has a strong product pipeline that should help to re-accelerate year-over-year earnings growth during the September quarter.

Target: Mr. Walkley cut his price target by $50 to $600 (U.S.) and maintained a "buy" rating. That's just above the average target of $601.55.

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The selloff in shares of Pacific Rubiales Energy Corp. after the oil and gas producer reported disappointing fourth-quarter results last week has been overdone, contends Raymond James analyst Kafi Khouri.

The company's results significantly missed consensus expectations and the stock came under further pressure from an unfavourable arbitration ruling involving Ecopetrol, Colombia's national oil group.

"We recommend investors with tolerance for some geopolitical and geological risk add PRE shares at current levels," Mr. Khouri said.

Target: Mr. Khouri downgraded the stock to "outperform" from "strong buy" and cut his price target to $30 from $32.50. The average Street target is $30.33.

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Lake Shore Gold Corp. has indicated that its first-quarter production will come in below expectation due to weather, unplanned maintenance and disruptions related to its mill expansion.

That will mean greater emphasis will be placed on the remaining quarters to deliver on 2013 guidance of 120,000 to 135,000 ounces.

"In order to achieve its production targets, LSG will need to: 1) increase throughput, aiming to reach a milling capacity of 3,000 tonnes per day by mid-June, and 2) increase grade, which in the past has been quite variable. We believe combining these two goals could be challenging," said CIBC World Markets anlayst Cosmos Chiu.

Target: Mr. Chiu cut his price target by 20 cents to $1.30 and maintained a "sector performer" rating. The average target is $1.40.

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Premier Royalty Inc. 's existing portfolio made up of royalty rights provides the company with immediate cash flow, while its small size relative to peers allows it to undertake smaller transactions that are still material, said Stonecap Securities analyst Christos Doulis.

"With a portfolio of cash flowing royalties, the company offers investors a compelling way to gain exposure to gold without some of the risks associated with owning a precious metals producer. The company has a strong balance sheet (with ~$30m in cash) that should allow it to acquire additional royalties, particularly as current capital market conditions are challenging for junior mining companies to raise capital," the analyst said.

Target: Stonecap initiated coverage with an "outperform" rating and a $1.80 price target. He is the first analyst to cover the stock, which recently was spun out from Premier Gold Mines Ltd.

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