The new Blackberry Passport smartphone.GUSTAU NACARINO/Reuters
Inside the Market's roundup of some of today's key analyst actions. This file will be updated often during the trading day so check back for new details.
BlackBerry Ltd. has entered the difficult part of its turnaround plan, says Goldman Sachs in downgrading the stock today.
The former tech powerhouse, analyst Simona Jankowski acknowledges, has made significant progress in cutting costs since John Chen took over in November 2013, but boosting the top line is another matter.
"While the quarterly revenue runrate is down over 30 per cent since then, the [operating expenses] runrate is down over 50 per cent and hardware gross margins are back in positive territory, helping BlackBerry achieve cash flow breakeven exiting 2014, a quarter ahead of plan," she said. "In 2015, the turnaround efforts shift from cutting costs to driving revenues – a more challenging phase that we think will fall short of expectations."
Goldman's survey shows weak demand for BlackBerry's enterprise mobility management system, and the analyst forecasts software revenues for the fiscal year of $426-million, well below the company's $500-million target.
Ms. Jankowski sees widening losses over the next two years rather than the return to profitability that management expects.
The analyst downgraded the stock to "sell" from "neutral" and trimmed her price target to $9 (U.S.) from $10. The average analyst price target is $9.56.
The downgrade hurt BlackBerry's stock. In Toronto, its shares were off 5.4 per cent to $12.71 (Canadian) and in the U.S., the shares were down 5.1 per cent to $10.12 (U.S.).
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Raymond James analyst Ryan Lewenza has "trepidation over bank earnings this year" due to general economic weakness in Canada this coming year and is downgrading the Canadian financials sector to market weight.
"The banks remain great long-term investments given their solid long-term earnings profile and steady dividends. As such, we continue to see them as core holdings in portfolios. However, upside may be more limited this year. Within the financials sector our preference is for the insurance and asset management sub-industries for 2015," he wrote in a report released Monday.
With a weaker economy and potential for higher credit provisions,"given these factors we see the potential for weaker bank earnings this year than previously anticipated. Analysts have been revising estimates lower for the sector, now forecasting earnings growth of 4 per cent year-over-year. We were expecting high-single digit EPS growth versus the 4 per cent expected today," Mr. Lewenza said.
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Perpetual Energy Inc. has been downgraded to "reduce" from "hold" by TD Securities Inc. analyst Aaron Bilkoski. While fourth-quarter production exceeded consensus and cash flow per share came in as expected, the analyst thinks the company is heavy on gas and could face a cash flow problem.
"Given Perpetual's high debt and low cash flow margins, the company's cash flow and valuation are extremely sensitive to both commodity price and cost assumptions," the analyst said.
Mr. Bilkoski lowered his target price to $1 from $1.20. Consensus is $1.28, according to Thomson Reuters.
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Credit Suisse AG analyst Edward Westlake thinks Phillips 66, is underappreciated. He is maintaining his "outperform" rating while hiking his target price.
The Houston-based refiner and energy company underperformed the sector late last year, but the analyst thinks management has outlined a strategy to combat its pure-play refiner peers and improve its earnings before interest, tax, depreciation and amortization.
"The shale revolution and rising global chemical demand should also allow management to capture further growth beyond 2018," the analyst said.
Mr. Westlake raised his target price to $100 (U.S.) from $75. Consensus is $80.38, according to Thomson Reuters.
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Dollarama Inc. will benefit from a "slight" ease in retail competition caused by the pending departure of Target Corp. from Canada, says BMO Nesbitt Burns analyst Peter Sklar.
Mr. Sklar also feels the retailer's flexibility allows it mitigate the negative impact brought by a weaker Canadian dollar.
He is raising his target based on a projected enterprise value of 18 times his fiscal 2016 operating estimate, an increase from 15.5 times.
Mr. Sklar is maintaining his "market perform" rating and is boosting his target price to $66 (Canadian) from $56. The analyst consensus price target is $60.32.
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Expecting "a strong year ahead for the athletic category in 2015" UBS has increased its price target on sports retailer Foot Locker Inc.
Foot Locker reported strong fourth quarter results with a 10 per cent increase in comparable store sales, and a 21.5 per cent increase in its earnings per share, and also said it expected double-digit EPS growth in 2015.
As a result, analyst Michael Binetti is raising his fiscal 2015 EPS estimates to $3.94 from $3.78, and expects revenue to grow 2.7 per cent.
The analyst boosted his price target to $67 (U.S.), up from $60. The consensus is $61.75.
In other analyst actions:
Cenovus Energy Inc. was upgraded to "outperform" from "market perform" at FirstEnergy.
Perpetual Energy Inc. was lowered to "reduce" from "hold" at TD Securities.
Teck Resources Ltd. was downgraded to "buy" from "top pick" at Cormark Securities.
Chevron Corp. was raised to "outperform" from "market perform" at Oppenheimer.
Amazon.com Inc. was rated new "buy" at Axiom Capital. The target price is $434 (U.S.) per share.
eBay Inc. was rated new "hold" at Axiom Capital. The target price is $60 (U.S.) per share.
KB Home was raised to "market outperform" from "market perform" at JMP Securities. The 12-month target price is $17 (U.S.) per share.
Liquor Stores N.A. Ltd. was raised to "outperform" from "sector perform" at National Bank. The 12-month target price is $16.50 (Canadian) per share.
Perpetual Energy Inc. was downgraded to "reduce" from "hold" at TD Securities. The 12-month target price is $1 (Canadian) per share.
Teck Resources Ltd. was downgraded to "buy" from "top pick" at Cormark Securities. The 12-month target price is $27 (Canadian) per share.
Wells Fargo & Co. was raised to "buy" from "hold" at Miller Tabak + Co. The target price is $61.25 (U.S.) per share.
Yelp Inc. was rated new "hold" at Axiom Capital. The target price is $48 (U.S.) per share.
Yahoo! Inc. was rated new "buy" at Axiom Capital. The target price is $52 (U.S.) per share.
With files from Bloomberg News