File photo of the shadows of people holding mobile phones are cast onto a backdrop projected with the Twitter logo in this illustration picture taken in Warsaw September 27, 2013. REUTERS/Kacper Pempel© Kacper Pempel / Reuters/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.
Twitter Inc.'s disappointing first-quarter results were met with a quick reaction from analysts on Tuesday.
The micro-blogging company reported slowing revenue and user growth on Monday.
According to Reuters, at least 15 brokerages have cut their price targets in reaction to the results.
The stock also received new ratings from several analysts, including:
- Barclays Capital downgraded the stock to "equal weight" from "overweight"
- Janney Capital moved it to "neutral" from "buy"
- Pivotal Research upgraded the stock to "buy" from "hold"
Many pointed to weak demand for the company`s direct response advertising, which is intended to encourage users to click on a link to an advertiser`s website.
"Simply put, advertisers aren't willing to bid up or spend as much with TWTR as expected," said RBC analysts in a research note. They cut their price target to $47 (U.S.) from $54.
Twitter reported a rise in revenue to $436-million in the quarter, compared to $250.5-million a year earlier. It was well below the average analyst estimate of $456.8-million.
"This quarter's revenue shortfall juxtaposed against the positive ad product and user experience improvement since the Investor Day highlights why we remain on the sidelines,`` said BMO Capital Markets analyst Dan Salmon, who lowered his price target to $42 from $47. "Twitter is still in flux and investor focus will now shift to questions about monetization after user growth dominated most of 2014 (and remains the underpinning to valuation)."
The company's monthly active users rose by 18 per cent to 302 million, which was in line with analyst expectations for slowing growth.
"While there were a few disappointments, we are encouraged by 74-per-cent revenue growth, driven by both users and monetization," said Canaccord Genuity analyst Michael Graham in dropping his price target from $56 to $52. "While we think most of the advertiser-related issues are temporary, the most negative aspect of the quarter in our view was the "low visibility" regarding Q2 (& beyond?) [monthly active user] growth. This could temper enthusiasm for the stock until corrected, or investors get comfortable with long-term growth driven solely by monetization improvements."
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CIBC World Markets analyst Kevin Chiang said the recent selloff of Canadian National Railway Co. shares is "overdone," believing there is a disconnect in the spread between the company's share price and the TSX as a whole.
Mr. Chiang pointed out CN is currently trading at 16.3 times next year's earnings per share versus the TSX at 15.9 times, the narrowest spread since 2011.
"CN's longer-term volume outlook remains positive and it continues to achieve core pricing growth of 3-4 per cent," he said. "CN remains positioned to put up top-line growth in the high-single-digit per cent range. We believe CN deserves to trade at a premium multiple."
CN shares are down almost 5 per cent since it reported first-quarter results on April 20, in which it cut its guidance for energy-related shipments. It continues to expect double-digit EPS growth this year.
In upgraded the stock to "sector outperform" from "sector perform," he played down the volume concerns while touting CN's "best-in-class" network.
"CN's volume growth will slow from Q2 and onwards; this is not an impairment in CN's volume growth story, but instead reflects the surge volumes it saw in Q2/Q3 last year as volumes were pushed out due to the Polar Vortex," Mr. Chiang said. "The carloads trajectory expected this spring/summer is more of a normalization in volumes."
He added: "We have a favourable outlook on CN's volume growth opportunities, reflecting demand for forestry products (tied to U.S. housing recovery), international intermodal (tied to its "Sell One CN" strategy and exclusive access to Prince Rupert), and chemicals (its network touches Western Canada and the U.S. Gulf), as well as its autoports strategy. We see annual carload growth of 3+ per cent as achievable. "
He maintained his target price of $91. The analyst consensus price is $81.97, according to Thomson Reuters.
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Raymond James analyst Ken Avalos upgraded Calloway Real Estate Investment Trust from "market perform" to "outperform" in the wake of its deal to purchase SmartCentres.
Calloway, which is changing its name to SmartREIT, becomes one of Canada's largest retail landlords after the $1.6-billion deal in which it acquires 24 shopping centres and nearly two million square feet in development space.
Mr. Avalos forecasts the deal adds nearly 4 cents in 2015 and 3 cents in 2016 to the company's funds from operations (FFO).
"We think the acquisition materially increases its [net asset value] growth trajectory, improves its internal capabilities and becomes much closer to a fully integrated real estate company that can allocate capital appropriately and generate NAV growth at almost any point in the real estate cycle," said Mr. Avalos.
He has set a price target of $33 (Canadian). The analyst consensus price is $32.25.
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BMO Nesbitt Burns analyst Michael Worms cut his earnings per share estimate for Entergy Corp for 2016 and 2017 to $5.25 and $5.33, from $5.50 and $5.63 (all U.S.), respectively, in the wake of weakness in the wholesale commodity business.
On Monday, Entergy reported its first-quarter profit fell 26 per cent due largely to a lower profit in its commodities segment. Its first-quarter earnings were $298.1-million, down from $401.2-million during the same quarter in 2014.
Mr. Worms did not adjusted his EPS forecast for 2015 ($5.40) as the company will benefit from a lower effective tax rate.
"While we had believed the headwind associated with the absence of this tax benefit in 2016 could be offset with sales growth, rate base growth, and rate relief, we are now less optimistic about forward prices and, therefore, believe near-term earnings growth could be more challenging than previously expected," he said.
He downgraded the rating to "market perform" from "outperform" and lowered his price target to $80 from $89. The analyst consensus is $83.93.
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Shares of Open Text Corp. are sinking on Wednesday, down more than 8 per cent after the firm reported a disappointing set of quarterly results after the close on Tuesday, despite hiking its dividend by 16 per cent.
The software company posted revenues and adjusted earnings per share well below the consensus estimate, and according to CIBC, the near-term environment is weak.
The depreciation of the euro relative to the Canadian dollar will continue to adversely affect Open Text for the next three quarters, said analyst Stephanie Price, who sees it shaving 7.5 per cent off revenues in the current quarter.
Customers have also been increasingly opting for cloud as opposed to license subscriptions, a process the analyst sees playing out over several years.
In addition, the company has been paying a heftier price for recent acquisitions.
Ms. Price remains constructive on the firm's longer-term prospects, however.
"Longer term, we view Open Text as well positioned with solid cash flow funding accretive acquisitions," she said. "However, we see F2016 as a transition year, with the company integrating Actuate, and building to its cloud subscription model."
The analyst downgraded the stock to "sector performer" from "sector outperformer" and lowered her price target to $63 (Canadian) from $70.
The average analyst price target is $68.69.
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Canadian Tire Corp. Ltd. (CTC.A-T) was initiated with an "outperform" rating at Raymond James.
Procter & Gamble Co. (PG-N) was downgraded to "hold" from "buy" at Societe Generale.
GoPro Inc. (GPRO-Q) was upgraded to "outperform" from "market perform" at Raymond James.
Sunoco LP (SUN-N) was upgraded to "buy" from "neutral" at UBS.
Pfizer Inc. (PFE-N) was lowered to "neutral" from "buy" at Citigroup.
Canadian Energy Services and Technology Corp. (CEU-T) was rated new "buy" at Canaccord Genuity. The 12-month target price is $7.50 (Canadian) per share.
Gibson Energy Inc. (GEI-T) was downgraded to "hold" from "buy" at GMP. The target price is $30 (Canadian) per share. The company was also downgraded to "market perform" from "outperform" at FirstEnergy Capital. The 12-month target price is also $30 (Canadian) per share.
Inter Pipeline Ltd. (IPL-T) was raised to "buy" from "hold" at GMP. The target price is$34 (Canadian) per share.
Keyera Corp. (KEY-T) was downgraded to "hold" from "buy" at GMP. The target price is $46 (Canadian) per share.
Madalena Energy Inc. (MVN-X) was rated new "hold" at TD Securities. The 12-month target price is 50 cents (Canadian) per share.
Edison International (EIX-N) was raised to "buy" from "neutral" at UBS by equity analyst Julien Dumoulin-smith. The 12-month target price is $70 (U.S.) per share.
Entergy Corp (ETR-N) was downgraded to "market perform" from "outperform" at BMO Capital Markets by equity analyst Michael Worms. The target price is $80 (U.S.) per share.
Lexmark International Inc (LXK-N) was raised to "market perform" from "underperform" at Raymond James by equity analyst Brian Alexander.
Marvell Technology Group Ltd (MRvL-Q) was downgraded to "market underperform" from "market perform" at JMP Securities by equity analyst Alex Gauna. The 12-month target price is $10 (U.S.) per share.
With files from Bloomberg News