Charles Rex Arbogast/The Associated Press
Inside the Market's roundup of some of today's key analyst actions. This file will be updated during the trading day.
CIBC World Markets analyst Robin Manson-Hing is urging investors to buy shares in Avigilon Corp. prior to the high-definition video surveillance manufacturer releasing its second-quarter results after markets close on Thursday.
"Management statements about the strength of its current business, the employee count, discussions with integrators in addition to sales manager hirings lead us to believe Q2 will be a record quarter for sales and earnings," he explained in a note. "Sales manager hirings slightly faster than forecast, a steadying (Canadian dollar vs. the greenback) and continued acquisitions in the video surveillance software industry all point to a rebound in AVO's share price post Q2 results."
The CIBC analyst is projecting second-quarter sales will rise 75 per cent from a year ago to $68.5-million, with an unchanged earnings per share of 19 cents.
While the stock trades at 30 times consensus 2014 earnings per share, versus peers at 18 times, the company's greater than 50 per cent growth in revenues justifies this valuation, the analyst said.
CIBC reiterated a "sector outperformer" rating, but cut its price target to $45 (Canadian) from $50. The analyst consensus price target for Avigilon over the next year is $36.50, according to Thomson Reuters data.
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At least five analysts cut their price targets on Groupon Inc. after its disappointing earnings release late Tuesday, which also saw the company cut its full-year profit outlook. Its shares opened down more than 15 per cent this morning.
Groupon says it now expects adjusted EBITDA of more than $270-million (U.S.) in 2014. It previously projected adjusted EBITDA of more than $300-million.
RBC Dominion Securities lowered its target to $5 (U.S.) from $6, one of the lowest targets on the Street.
Credit Suisse, meanwhile, slashed its target to $6.50 from $10 while reiterating a "neutral" rating. It commented: "The company continues to transition from a 'push' to 'pull' platform in tandem with the migration of traffic to mobile, and expansion initiatives in Asia. A notable and continued headwind from the business transition was the 7 per cent decline in North America gross profit versus being up 4 per cent in 1Q14. This is in contrast to 12 per cent year/year growth for North America 2Q14 revenue."
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An increase in food prices should continue to help boost Metro Inc.'s top line, RBC Dominion Securities analyst Irene Nattel said. Meanwhile, the company's share buyback program is lending support to the bottom line.
Looking ahead to Metro's third-quarter earnings release, scheduled for Aug. 13, RBC expects growth in same-store sales of 1 per cent to 1.5 per cent over last year, and earnings-per-share growth of 4.6 per cent.
As food inflation has picked up, Metro has been able to pass at least some of that increase on to consumers. Those gains have been moderated, however, by industry competition and Metro's investment in gross margin, which RBC expects produced a decline in net income of 4 per cent.
But a declining share count still produced earnings gains on a per share basis, Ms. Nattel said. "Metro has a consistent track record of annual dividend increases and share buyback, both of which are typically associated with share price outperformance."
Ms. Nattel raised her price target on Metro's shares to $77 (Canadian) from $73 while maintaining an "outperform" rating. The analyst consensus price target for Metro over the next year is $68.41.
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In anticipation of Saputo Inc.'s next big acquisition, investors have pushed up the company's share price to a level suggesting limited upside in the year ahead, CIBC World Markets analyst Mark Petrie said.
On Tuesday, Saputo released its first-quarter results, in which the company missed expectations on earnings but increased its dividend.
Neither of which are the main focus of shareholders of Saputo, which already has several large, successful acquisitions under its belt.
"Saputo has always been acquisition-focused, and is so today as much as ever," Mr. Petrie said. "With $3.5B in deal capacity, [the company] could be vying for a large international deal."
He raised his price target to $69 (Canadian) from $62 and maintained a "sector performer" rating.
"Saputo is an attractive long-term holding, with strong cash flows and balance sheet, and a history of smart acquisitions," Mr. Petrie said. "But at this share price, we see better value in other names."
Desjardins Capital Markets analyst Keith Howlett shared that outlook, raising his target price to $71 from $64 while reiterating a "hold" rating.
"We continue to have high confidence in Saputo's long-term outlook, but are struggling with near-term valuation," he said.
TD Securities also raised its price target on Saputo to $67 from $63, with its "hold" rating unchanged.
The analyst consensus price target for Saputo over the next year is $63.22.
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Canaccord Genuity analyst Scott Chan initiated coverage of Sprott Resource Corp. with a "buy" rating a $3.75 (Canadian) price target.
Sprott Resource is a Canadian-based company that invests and operates through its subsidiaries in the natural resource sector. Its focus includes energy, agriculture, and mining.
The holding periods on Sprott investments are typically four to six years, similar to traditional private equity. It targets an internal rate of return (IRR) of 25 per cent, and over the past five years, has generated an IRR in the high-teens.
Mr. Chan thinks Sprott offers investors a way to invest in the resource sector at a discount.
"Currently, the combination of SCP's publicly traded holdings equate to SCP's market cap. We estimate investors receive SCP's private investments (i.e., InPlay Oil Corp., Union Agriculture, One Earth Farms, One Earth Oil & Gas, etc.) essentially for free," he said.
"Despite SCP's year-to-date stock increase of 32 per cent, SCP is still trading at a 35 per cent discount to our next 12 month net asset value and a 20 per cent discount to SCP's reported first quarter 2014 net asset value."
The analyst consensus price target for Sprott Resource over the next year is $3.37.
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In other analyst actions:
Canaccord Genuity downgraded Luna Gold to "hold" from "buy" and cut its price target to $1 (Canadian) from $1.60. National Bank Financial also downgraded the stock, to "underperform," with its price target dropping to 75 cents from $1.50. (Read more in our Small Cap Stocks to Watch post)
Raymond James cut its price target on Imperial Metals to $11.75 (Canadian) from $17.50 and maintained a "market perform" rating after the Mount Polley tailings spill this week. TD Securities cut its target to $12 from $20 and downgraded its rating to "hold" from "buy."
Cantor Fitzgerald upgrades Rocky Mountain Dealerships to "buy" from "hold" and maintained a $12 (Canadian) price target. (Read more in our Small Cap Stocks to Watch post)
BMO Nesbitt Burns upgraded Caribbean Utilities to "market perform" and hiked its price target to $10.50 (U.S.) from $10.
National Bank Financial upgraded Canexus to "sector perform" from "underperform" and raised its price target to $4.50 (Canadian) from $4.25.
Canaccord Genuity initiated coverage on Sprott Resource with a "buy" rating and $3.75 (Canadian) price target.
Goldman Sachs downgraded Target to "neutral" from "buy" and cut its price target to $59 (U.S.) from $65.
Morgan Stanley added Macy's to its "best ideas list" and raised its price target to $66 (U.S.) from $60.
UBS downgraded Norwegian Cruise to "neutral" from "buy" and cut its price target to $36 (U.S.) from $37.
Darcy Keith