Thursday's analyst upgrades and downgrades

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Inside the Market's roundup of some of today's key analyst actions. This file will be updated during the trading day.

Canaccord Genuity downgraded Quebecor Inc. to "hold" from "buy" and cut its price target to $28 (Canadian) from $32, citing risks associated with the company's possible national wireless expansion through its Videotron unit.

"While Videotron is waiting for better mandated roaming rules and equity partners before it decides whether to launch wireless nationally, we believe that national wireless expansion risk may cap the stock over the medium term," said Canaccord analyst Dvai Ghose in a note.

Ottawa has been pressing hard to spur more competition in the Canadian wireless market. Earlier this month, it announced plans to auction prime (AWS-3) spectrum in a way that would motivate an investor to buy and combine smaller struggling players such as Mobilicity and Wind Mobile.

Quebecor's Videotron has signaled it may be willing to become Ottawa's long-sought fourth wireless player and this past winter spent $233-million buying valuable spectrum in Canada's four most populous provinces. But Quebecor has also strongly hinted it wants more help from Ottawa in order to make it more attractive to roll out wireless service across the country.

"While government may bend over backwards to entice Videotron to launch wireless nationally, the odds are stacked against it – We note 1) the four-player model has consistently failed in Canada and most developed markets; 2) Quebecor has a weak balance sheet and still has to acquire the Caisse's 25 per cent stake in QMI Agency; 3) Videotron lacks competitive advantages outside Quebec; 4) its wireless results in Quebec have been less than stellar; 5) we wonder who wants to partner with Videotron outside Quebec; 6) telecom joint ventures have generally failed; and 7) controlling shareholder Peladeau's Quebec nationalist political views may become an issue."

He notes that national wireless expansion would come at a time of unprecedented attack on the cable business in Quebec. "Videotron is facing a significant challenge from Bell's IPTV. It still has to formulate its own IPTV strategy and runs the risk of pricing pressure in Quebec from Bell on the wireline and wireless side and Bell, Rogers and Telus on the wireless side if it pursues overly aggressive wireless pricing outside Quebec," Mr. Ghose said.

Earlier this week, Mr. Ghose upgraded Rogers Communications Inc. to "hold" from "sell," citing recent price depreciation in its shares and "overblown" fears about a fourth national wireless player coming to market.

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RBC Dominion Securities analyst Michael Harvey downgraded Peyto Exploration & Development Corp. to "sector perform" from "outperform," in part due to the bank taking a slightly more cautious view on natural gas prices - but also because of limited upside now to its $43 (Canadian) price target.

"We continue to like the Peyto story, and consider it a best in class natural gas explorer and producer. However, its implied return is now in line with other sector performer-rated producers, hence our lowered recommendation. We look forward to a more attractive entry point in the stock.

The analyst consensus price target for Peyto Exploration & Development over the next year is $45.58.

Shares in the company are down 2 per cent in early TSX trading.

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Painted Pony Petroleum Ltd. was also downgraded by RBC analyst Michael Harvey after a huge surge in its share price.

"With PPY up 76 per cent year-to-date (the best amongst our coverage) and trading at a premium to its peers, we see its peer-leading forecast growth as becoming reasonably reflected in the stock at current levels," said Mr. Harvey.  "We continue to like the company, and look forward to a more attractive entry point."

He added that caution towards the natural gas market is a factor in the ratings change, but that operating performance at Painted Pony remains strong.

Mr. Harvey lowered his rating on Painted Pony to "sector perform" from "outperform" and cut his  price target to $15 from $16 (Canadian). The analyst consensus price target for Painted Pony Petroleum over the next year is $17.50.

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This year has not been kind to Bombardier Inc., but CIBC World Markets analyst Kevin Chiang sees better times ahead.

Mr. Chiang explains that while Bombardier continues to grow its backlog, order flow remains weak and its C Series test program remains grounded due to engine problems.

However, Bombardier reports second-quarter results on July 31, and Mr. Chiang is forecasting earnings before interest, taxes, debt and amortization of $344-million versus consensus at $342-million.

"BBD.B is trading at a significant discount to its peers reflecting concerns around the C Series execution," says Mr. Chiang. "We continue to believe that despite the hiccups to date causing near-term share price volatility, the company validating the C Series' performance will help drive sales momentum."

He maintains his "sector outperformer" rating and $4.74 (Canadian) target price.  The analyst consensus price target over the next year is $4.11, according to Thomson Reuters.

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The near-term outlook for Catamaran Corp. is improving, but longer-term questions remain, says Credit Suisse analyst Glen Santangelo.

Catamaran shares have languished while the entire pharma supply sector has climbed higher, says Mr. Santangelo.

"We have been struck by the lack of investor interest in the name recently, although we acknowledge the lingering frustration from the disappointing 2014 guidance and longer-term concerns with PBM (pharmacy benefit management) business model," he says. "Call volume and interest in CTRX and the PBM industry has evaporated over the last several months, suggesting very low expectations."

However, Mr. Santangelo expects better news when Catamaran reports second-quarter results on Aug. 1. He says the drivers of outperformance in from the first quarter are still in place for the second quarter, and that acceleration of pharmaceutical growth should aid as well.

Mr. Santangelo maintains his "outperform" rating and $54 (U.S.) price target. The analyst consensus price target over the next year is $52.91, according to Thomson Reuters.

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In other analyst actions:

Euro Pacific Canada removed its "top pick" on Telus, now rating it as a "buy," citing new wireless regulatory risks. Its price target was dropped to $42 (Canadian) from $44.

Raymond James raised its price target on Canadian National Railway to $78 (Canadian) from $68 and maintained an "outperform" rating.

PI Financial upgraded Arsenal Energy to "buy" from "neutral" and raised its price target to $10 (Canadian) from $7.80.

RBC initiated coverage on American International Group with an "outperform" rating and $64 (U.S.) price target.

At least seven analysts cut their price targets on EBay in the wake of the company's weaker-than-expected earnings Wednesday.

Jefferies downgraded GNC Holdings to "hold" from "buy" and cut its price target to $39 (U.S.) from $50.