The company blew through billions of dollars developing, making and marketing products that consumers aren’t buying.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.
BlackBerry Ltd.'s share of the global smartphone market is falling fast, warned Canaccord Genuity analyst T. Michael Walkley today as he revealed the research firm's latest handset sales survey.
Mr. Walkley reiterated a "hold" rating on BlackBerry shares and a $6 (U.S.) price target, but he reduced his fiscal 2014 smartphone sales estimates for the company after concluding it will only have a 1.4 per cent share of global smartphone sales during the current quarter. That's a drastic decline from its 4.2 per cent market share in the third quarter and a far cry form the 15 per cent market share it had in the third quarter of 2010.
"Following very disappointing August-quarter results, our Oct./Nov. handset sales survey work indicated very weak sales trends with falling BlackBerry 10 prices and continued high levels of inventory," Mr. Walkley said in a research note. "Following the unsuccessful funding of Fairfax Financial's $9/share bid, we believe a sale of BlackBerry is no longer imminent and few – if any – candidates remain to purchase the company in its entirety.
"While we maintain our belief BlackBerry will ultimately end up selling the company due to the difficult competitive smartphone market and low probability BlackBerry 10 can return BlackBerry to sustained profitability, we now believe a breakup is more likely than an outright sale and fundamentals will continue to deteriorate over a now longer public sale process under new management," he added.
Canaccord now estimates that consumer BlackBerry sales are down more than 50 per cent year-over-year. In addition, its surveys indicate continued soft enterprise sales of the BlackBerry 10, as companies have delayed upgrades from earlier BlackBerry 7 devices given the uncertainty around BlackBerry's future. The trend of corporations letting employees use their own devices for work is also encouraging a shift from BlackBerry use to other smartphones - especially Android and Apple devices.
He lowered his fiscal 2014 BlackBerry unit estimates to 19 million from 19.7 million, which represents a 33 per cent drop from a year earlier.
"Despite BlackBerry's significant restructuring to lower operating costs, our forward estimates remain below break-even levels," said Mr. Walkley, who lowered his fiscal 2014 loss per share estimate to $1.09 from 82 cents, and his fiscal 2015 loss-per-share estimate to $1.28 from $1.24.
The average price target is $7.31 (U.S.), according to Thomson Reuters data.
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RBC Dominion Securities analyst Steve Arthur upgraded CAE Inc. to "outperform" from "sector perform," believing the maker of flight simulators is trading an an attractive valuation given expectations that margins will soon improve.
"After several quarters of restructuring and relocating simulators, we anticipate further gradual margin improvement in coming quarters," Mr. Arthur said in a research note. "We expect the shares will react positively on growing evidence of margin improvement, and suggest investors build positions ahead of that at currently attractive valuation levels."
Among moves to improve its operations, CAE has relocated about 20 flight simulators from areas with overcapacity in the training network to regions with strong demand. Mr. Arthur believes these redeployed simulators should begin contributing materially to revenue and margins in the second half of fiscal 2014
RBC raised its price target to $14 (Canadian) from $13. CIBC World Markets today also nudged up its target to $13 from $12.50. But TD Securities downgraded to stock to "hold" from "buy" and trimmed its target to $13 from $13.50.
The average price target is $12.30.
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Linamar Corp.'s 53-per-cent rise in third-quarter profit has prompted RBC Dominion Securities to upgrade the Guelph, Ont.-based auto parts maker.
A global resurgence in auto sales and strong demand for the company's Skyjack lift vehicles will continue to drive profits, analyst Steve Arthur said in a research note. Mr. Arthur noted Linamar posted a 15-per-cent rise in revenues, enjoyed strong sales in its powerline/driveline business, and saw better-than-expected margins. It has also been shrinking its debt. He said Linamar trades at a discount to its peers.
Mr. Arthur raised Linamar's share price target to $44 from $36 and upgraded the rating to "outperform" from "sector perform." Separately, Canaccord Genuity raised its price target on Linamar to $43 (Canadian) from $39 and maintained a "buy" rating, while BMO Nesbitt Burns raised its target to $46 from $43 and maintained an "outperform" rating.
The average target is $38.80.
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An increasingly competitive retail environment has led to a decline in sales for Metro Inc., prompting Keith Howlett of Desjardins Securities to cut his price target for this stock to $67 (Canadian) from $70. He reiterated a "hold" rating.
Grocery chains in Canada have been hit hard with competition from the expanding produce sections of Wal-Mart and newly-arrived Target, which forced Metro to lower prices in order to remain competitive.
"If industry conditions were not as challenging as they are, we would revert to a buy on the shares. For the moment, we recommend that investors not add to positions until the timeline to industry improvement is easier to discern," he said.
Credit Suisse analyst David Hartley also maintained a "neutral" rating and cut his target to $65 from $72.
"From a grocery perspective, we expect Metro to be the laggard amongst its Canadian peers behind Loblaw and Empire/Sobeys in terms of potential earnings upside. Metro appears to have fewer levers to pull to drive shareholder value, other than a share buyback or dividend increase, which we believe is largely priced into the share price today," he said.
BMO Nesbitt Burns maintained an "underperform" rating and cut its target to $62 from $68.
The average target among analysts is $70.33.
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Cisco Systems Inc. shares plunged 11 per cent Thursday after delivering a profit warning late on Wednesday and reporting disappointing first-quarter revenues.
Several analysts cut their price targets, including Kulbinder Garcha of Credit Suisse, who reiterated an "underperform" and cut his price target to $20 (Canadian) from $21.
"Cisco appears to be entering a turbulent stretch, and without year/year growth expected for the next few quarters, the company looks increasingly vulnerable in an environment of accelerating technological innovation and competitive pressures," he said.
The company is struggling with a shifting business model in set-up top boxes in addition to venturing into software-defined networking technology, which brings with it the threat of shrinking profits for the industry, said Mr. Garcha.
Wedbush downgraded Cisco to "neutral" from "outperform" and also cut its price target to $23 (U.S.) from $26. BMO Nesbitt Burns maintained an "outperform" rating and reduced its target to $25 from $29. UBS cut its price target to $26.50 from $28.50 and maintained a "buy" rating.
The average target among analyst is 26.51.
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In other analyst actions today:
Sterne Agree downgraded Lululemon Athletica to "underperform" from "neutral" and cut its price target to $56 (U.S.) from $75, commenting that the company's current valuation is not sustainable and the company is alienating its customers.
CIBC downgraded Rona to "sector underperformer" and maintained an $11 (Canadian) target, citing tough competition, a weak macro environment and it believes a sales rebound in 2014 is already factored into its share price.
RBC Dominion Securities downgraded Transcontinental to "sector perform" from "outperform" and raised its price target to $17 (Canadian) from $16. It largely cited recent stock appreciation for the downgrade.
Canaccord Genuity downgraded MBAC Fertilizer to "speculative buy" from "buy" and cut its price target to $2.75 (Canadian) from $3.55.
CIBC World Markets cut its price target on Loblaw Co. to $50 (Canadian) from $53 and maintained a "sector performer" rating. Credit Suisse cut its target to $58 from $61 but maintained an "outperform" rating. BMO Nesbitt Burns cut its target to $53 from $56 and maintained an "outperform" rating.
CIBC World Markets raised its price target on Ag Growth International to $42 (Canadian) from $38 and maintained a "sector performer" rating.
Canaccord Genuity cut its price target on Thompson Creek Metals to $1.50 (Canadian) from $2.60 and kept a "sell" rating.
CIBC World Markets raised its price target on Tahoe Resources to $25 (Canadian) from $19.50 and maintained a "sector outperformer" rating.
JPMorgan downgraded Penn West Energy to "neutral" from "overweight" and cut its price target to $11.44 (U.S.) from $15.55.
Jennings Capital downgraded PMI Gold to "speculative buy" from "buy" and cut its price target to 65 cents (Canadian) from $1.25.
Wedbush downgraded Cisco to "neutral" from "outperform" and cut its price target to $23 (U.S.) from $26. Credit Suisse lowered its price target to $20 from $21 and maintained an "underperform" rating. UBS cut its price target to $26.50 (U.S.) from $28.50 and maintained a "buy" rating. BMO Nesbitt Burns cut its price target to $25 from $29 and reiterated an "outperform" rating.
Credit Suisse upgraded PGT Industries to "outperform" from "neutral" and maintained an $11 (U.S.) price target.
UBS raised its price target on Macy's to $55 (U.S.) from $50 and maintained a "neutral" rating. BMO Nesbitt Burns raised its target to $53 from $50 and maintained a "market perform" rating.
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For more analyst actions, breaking investing news and analysis, follow Darcy Keith on Twitter at @eyeonequities