Gold is poured at Agnico-Eagle's Meadowbank Mine.CHRIS WATTIE/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.
This is the kind of day gold bugs dread. Three major banks have significantly cut their gold price projections, resulting in a slew of downgrades and price target cuts for producers of the metal.
The actions come just one day after Moody's Investors Service cut its own gold price forecast for this year, which puts credit ratings at risk of a possible future downgrade as well.
Desjardins Securities cut its gold and silver price forecasts for every year from 2014 to 2017. Rather ironically, it tied the move in part to producers' success at cutting their own costs. The thinking is that if the industry can continue to produce gold at a lower bullion price, it will ensure supply will keep flowing into the market.
"We see continued headwinds for gold in 2014, given that many of the conditions that led to gold's price decline in 2013 still appear to be in place as we head into 2014 (the spectre of Fed tapering, rising real interest rates, strong equity market performance, selling of gold ETF holdings)," Desjardins analysts Adam Melnyk and Mike Parkin said in a research note.
Its new long-term gold price is $1,350 (U.S.) per ounce and for silver $24.50 an ounce, down 11 per cent and 10 per cent, respectively, from its previous assumptions.
For this year, it now sees gold averaging $1,225 an ounce, down from its earlier forecast of $1,400 an ounce. It sees prices gradually improving until they peak at $1,350 an ounce in 2017.
It cut price targets on several gold companies, and downgraded its ratings on three: Agnico-Eagle (to "hold" from "buy" with its price target dropping to $32 Canadian from $38); New Gold (to "buy" from "top pick" with a price target of $7, down from $8.75); and Richmont Mines (to "hold" from "buy" with the target falling to $1.20 from $2.30).
But it did upgrade one stock: Osisko Mining, with a new rating of "top pick." It kept a $6.75 price target and expects the company to have record gold production this year thanks mostly to expectations for higher grade ore to be mined.
Meanwhile, TD Securities lowered its 2014 gold price target to $1,250 (U.S.) an ounce from $1,350 and cut its long-term gold price forecast to $1,250.
"We expect gold to face continued headwinds in 2014 on additional Fed tapering, the potential for higher interest rates, continued selling of the gold ETFs, and generally weak commodity markets," said TD analyst Greg Barnes. "That said, we do not expect a similar sell off in gold in 2014 as we experienced in 2013 (down 28 per cent for the year)."
"Despite tapering moves by the Fed, we expect interest rates to remain low by historical standards (and short-term rates negative) for a considerable time. In addition, the Fed's hawkishness could be constrained with inflation running well below its target," Mr. Barnes added.
Citing his lower gold price forecasts, Mr. Barnes downgraded Kinross Gold to "hold" from "buy" and cut his price target to $5.50 from $6.50.
Elsewhere, Merrill Lynch today cut its forecast for gold this year by 11 per cent to $1,150 an ounce. It also cut its price for silver by 21 per cent to $18.38 an ounce.
While Merrill Lynch analyst Michael Widmer said gold prices could bottom out later this year, a lack of buying interest could result in renewed selling in the meantime.
"If investors stopped selling gold, prices could stabilize around $1,200/oz. Yet, this is not our base case and a more likely scenario is for investors to continue reducing their exposure. Our model suggests that this could take prices down to $1,000/oz.," Mr. Widmer said.
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Healthy growth and rising fare prices have RBC Dominion Securities analyst Walter Spracklin pushing Air Canada's target price higher.
Mr. Spracklin noted that Air Canada posted healthy fourth-quarter traffic growth of 2.5 per cent, with capacity growth coming in at 3.5 per cent. Combined with year-over-year fare price increases, he sees another strong quarter ahead for the carrier.
"We are revising upward our Q4/13 estimates to account for the better fare prices," he said.
Mr. Spracklin maintained his "outperform" rating and is raising his target price to $10, from $8.
He also raised his price target on WestJet to $34 from $31, citing recent robust traffic data from that carrier.
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Desjardins Securities analyst Jackie Przybylowski downgraded Colonial Coal International Corp. and sliced her price target in half after revising down forecasts for metallurgical coal prices.
Desjardins now sees long-term metallurgical coal prices of $150 (U.S.) per tonne fob, down from $165.
"Our net asset value estimate for Colonial's primary assets has significantly deteriorated following incorporation of our updated commodity and currency assumptions into our estimates," she said.
The analyst cut her price target price to 30 cents (Canadian) from 60 cents and lowered her rating to "sell" from "hold."
The average price target is 67 cents.
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A freshly signed $50-million, three-year contract says great things about the prospects for billing and customer care services provider Redknee Solutions, which is building up a healthy backlog, according to Cantor Fitzgerald Canada analyst Justin Kew.
The contract comes on the heels of two enhanced deals with a combined approximate value of $23-million, and together "demonstrate the organic growth opportunity inherent in the Nokia Siemens Networks (NSN) customer base."
Mr. Kew is maintaining his "buy" recommendation and $7.75 (Canadian) target price. The average price target is $7.33.
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In other analyst actions
Cowen & Co. downgraded Teck Resources to "market perform" from "outperform" and cut its price target to $27 (U.S.) from $34.
M Partners downgraded Gluskin Sheff & Associates to "hold" from "buy," saying shares are fully valued. It hiked its price target to $27.25 (Canadian) from $24.
Raymond James upgraded Legumex Walker to "strong buy" from "outperform" and raised its price target to $8.75 (Canadian) from $7.25.
Canaccord Genuity hiked its price target on Monsanto to $135 (U.S.) from $125 and maintained a "buy" rating. JPMorgan downgraded the company to "neutral" from "overweight" and raised its price target to $115 from $113. Credit Suisse raised its target to $134 from $121 and maintained an "outperform" rating.
RBC Dominion Securities cut its Goldcorp price target to $30 (U.S.) from $32 but reiterated an "outperform" rating.
Credit Suisse downgraded Bed Bath & Beyond to "neutral" from "outperform" and cut its price target to $78 (U.S.) from $85.
Credit Suisse upgraded Aetna to "outperform" from "neutral" and raised its price target to $83 (U.S.).
Piper Jaffray upgraded J.C. Penney to "overweight" from "neutral" with an unchanged price target of $11 (U.S.).
Deutsche Bank downgraded Sprint to "hold" from "buy" and raised its price target to $9.25 (U.S.) from $8.50.
BMO Nesbitt Burns upgraded Macy's to "outperform" from "market perform" and raised its price target to $70 (U.S.) from $53.
RBC Dominion Securities raised its price target on Micron Technology to $28 (U.S.) from $19 and maintained a "sector perform" rating.
Jefferies upgraded Johnson & Johnson to "buy" from "hold" and raised its price target to $108 (U.S.) from $102.
TD Securities downgraded Exfo to "hold" from "buy" and cut its price target to $5 (U.S.) from $7. RBC cut its price target to $5.25 from $6 and maintained a "sector perform" rating.
UBS raised its price target on Wynn Resorts to $204 (U.S.) from $184 and maintained a "neutral" rating.
UBS raised its target on MGM Resorts International to $25 (U.S.) from $19 and maintained a "neutral" rating.
Canaccord Genuity downgraded Nvidia to "hold" from "buy" but kept a $16 (U.S.) price target.
Cowen initiated coverage on Twitter with a "sell" rating and $32 (U.S.) price target.
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For more analyst actions, breaking investing news and analysis, follow Darcy Keith on Twitter at @eyeonequities