A filing announced Friday in New York alleges disclosure shortcomings artificially inflated the stock price of the Vancouver-based retailer.Reuters
Inside the Market's roundup of some of today's key analyst actions. This file will be updated during the trading day. For breaking analyst actions prior to market open every day, read our Before the Bell morning report.
Shares of Lululemon Athletica Inc. are on the rise today after banking giant JPMorgan initiated coverage on the yoga apparel retailer with an "overweight" recommendation, arguing that its growth trajectory remains intact despite a number of well-publicized ordeals over the past year.
By December 2014, JPMorgan analyst Brian Tunick predicts the stock will be trading at $84 (U.S.). Shares this afternoon are trading up nearly 4 per cent at $69.57. The stock is no longer listed in Toronto.
"After a 2013 wrought with execution issues, we see multiple levers to reaccelerate top- and bottom-line growth in fiscal year 2014 and beyond," Business Insider quoted Mr. Tunick as saying in a research note.
Among them: double-digit online growth, a recovery in margins, and more store footage devoted to younger teenagers.
In 2014, Lululemon will have the benefit of results being compared to a weak 2013, when it recalled its top-selling Luon black yoga pants because they were too sheer, Mr. Tunick points out. And an appointment of a new CEO could be showcased at the company's analyst day in April. The company is also set to open its first European store opening in London in the second quarter of 2014.
"LULU's multiple - while not cheap - could be poised for expansion once a new CEO is appointed and investors refocus on the brand's top-line and margin recapture prospects in 2014 and beyond," he said.
The average target among analysts is $74.88, according to Thomson Reuters.
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CIBC World Markets analyst Cosmos Chiu downgraded Gabriel Resources Ltd. to "sector underperformer" from "sector performer" after a Romanian parliamentary commission this week rejected a draft law that would have allowed construction of its $1-billion (U.S.) Rosia Montana mine in Transylvania.
Gabriel said the rejection of the draft bill does not mean that the proposed mine is dead. But, "at a minimum, these parliamentary rejections will result in a further delay in the development of the project, in our opinion," said Mr. Chiu.
"We believe these parliamentary rejections of the draft law in its current form increase the risk profile of the project," he added.
The government now wants to create a new legal framework for all gold and silver mining projects in general. Mr. Chiu believes Gabriel has little chance to be granted all the licenses, permits and other legal authorizations over the next 12 to 18 months that would permit construction to begin.
He slashed his price target to 60 cents (Canadian) from $2. The average Street target is $2.14.
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Industrial Alliance Securities upgraded MacDonald, Dettwiler and Associates to "buy" from "hold" due to recent share price depreciation that has left the stock at an attractive level.
"Given MDA's solid long term growth prospects and increasing backlog, accumulation at reduced price levels looks attractive," Industrial Alliance analyst Al Nagaraj said in a research note.
He maintained a price target of $87 (Canadian), which is just a little below the Street consensus of $87.45.
"MDA has a strong business model and the recent SSL acquisition has well positioned them to win new business in the U.S. market," he added. SSL is short for Space Systems/Loral, a leading provider of commercial satellites.
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Dairy company Dean Foods Co. has been downgraded by Credit Suisse analyst Robert Moskow, who says falling milk sales, high costs and problems with plant shutdowns will weigh on the Dallas company's stock price.
Dean Foods this week reduced its sales outlook and said it would close more plants after sales fell by 1.6 per cent in the latest quarter.
Americans are drinking less milk, turning to lower-fat beverages or lactose-free drinks. Despite government warnings to drink more milk, U.S. consumption fell to 0.61 cups a day in 2007-08 from almost one cup a day in 1970, according to the U.S. government. More than half of adults and adolescents in the U.S. drank no milk on a given day in 2007-08, the U.S. Department of Agriculture says.
The Dallas-based dairy company's products include milk, ice cream and cheese. Its share price has risen by 16 per cent this year.
"We think the [enterprise value/EBITDA] multiple will remain muted until investors get better confidence in management's visibility," Mr. Moskow wrote in a research note.
Mr. Moskow downgraded Dean Foods to "neutral" from "outperform" and reduced his share-price target to $19 (U.S.) from $24. The average target is $24.08.
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The explosive growth in oil and natural gas production in North America has added to Gibson Energy Inc.'s bottom line, leading Industrial Alliance Securities analyst Al Nagaraj to upgrade his rating to "strong buy" from "buy."
He also hiked his price target to $32 (Canadian) from $29.
Mr. Nagaraj noted consulting firm ICF International predicts an additional $230-billion will be put into developing oil and gas infrastructure in North America by 2035.
The company announced earlier this year that it would develop a new crude by rail terminal in Alberta with the help of a U.S. partner.
"Demand for Gibson's services - centered on the midstream value channel with services for storage, transportation, environmental services, and distribution - will expand for many years to come due to the projected expansion in infrastructure," he said.
The average target among analysts is $29 according to Thomson Reuters.
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Ailing home renovation retailer Rona Inc. continues to get a "hold" rating from Canaccord Genuity analyst Derek Dley after reporting the retailer's 13th consecutive quarter of declining same-store sales.
"We believe that heightened competition, along with a challenging home renovation spending market in Canada, will continue to weigh on the company's top line over coming quarters," he said.
The company also announced its intentions to buy back just over 7 per cent of its common shares in an effort to optimize capital structure and increase shareholder value, leading Mr. Dley to increase his price target to $11.50 (Canadian) from $10.75.
The retailer has attempted over the past year to cut costs, announcing plans earlier this year to close 11 unprofitable stores and cut over 900 jobs.
A new merchandising strategy has also led the company to focus on lowering prices for products consumers pay the most attention to, while maintaining or raising the prices of less-cared-about merchandise.
However, "as Rona continues to invest in pricing, we expect gross margins to continue to be challenged over the coming quarters, offsetting improvements in SG&A (selling, general & administration) expense control," he said.
Keith Howlett of Desjardins Securities also kept a "hold" rating and increased his target to $13 from $12.
"Progress in the third quarter 2013 was solid and it appears to us that management has gotten control of the key levers of the business and the company's finances," he said, adding that he expected sales to start increasing in the second half of 2014.
The average target among analysts is $11.64, according to Thomson Reuters.
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Argonaut Gold Inc., poised to boost output at its low-cost mines, was upgraded by CIBC World Markets analyst Jeff Killeen to "sector performer" form "sector underperformer." He pointed to its strong production guidance and good assets.
The company is headquartered in Nevada, mines in Mexico, and trades on the Toronto Stock Exchange.
Mr. Killeen raised Argonaut's share-price target to $6 (Cdn.) from $5. The average target is $7.94.
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In other analyst actions today:
UBS upgraded Western Refining to "buy" from "neutral" and raised its price target to $41 from $34.
Desjardins Securities downgraded Maxim Power to "hold" from "buy" and maintained a $3.75 (Canadian) price target.
TD Securities cut its price target on Argent Energy Trust to $10.50 (Canadian) from $12 and maintained a "hold" rating.
Raymond James raised its price target on Exchange Income Corp. to $22.75 (Canadian) from $20 and maintained a "market perform."
Susquehanna downgraded Intrepid Potash to "negative" from "neutral" and cut its price target to $10 (U.S.) from $12.
Clarus Securities raised its price target on Semafo to $4.40 from $3.30 and maintained a "buy" rating.
Goldman Sachs upgraded Qualcomm to "conviction buy" from "buy" with a price target of $80 (U.S.).
Cantor Fitzgerald Canada raised its price target on Ag Growth International to $45 (Canadian) from $42 and maintained a "buy" rating.
M Partners cut its price target on Enterprise Group to $1.65 (Canadian) from $2.05 and maintained a "buy" rating.
RBC Dominion Securities raised its price target on Atrium Innovations to $21 (Canadian) from $18 and maintained a "sector perform" rating.
AltaCorp Capital Research cut its price target on Painted Pony Petroleum to $11 (Canadian) from $14 and maintained an "outperform" rating.
Credit Suisse upgraded Alliant Techsystems to "outperform" from "neutral" and raised its price target to $148 (U.S.) from $111.
Credit Suisse upgraded NuStar Energy to "neutral" from "underperform" and raised its price target to $53 (U.S.) from $43.
Credit Suisse initiated coverage on J.M. Smucker with a "neutral" rating and $115 ((U.S.) price target.
UBS downgrades Aon plc to "neutral" form "buy" but raised its price target to $87 (U.S.) from $77.
UBS raised its price target on Cigna to $101 (U.S.) from $89 and maintained a "buy" rating.
UBS raised its price target on Intuit to $84 (U.S.) from $70 and maintained a "buy" rating.
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For more analyst actions, breaking investing news and analysis, follow Darcy Keith on Twitter at @eyeonequities