Snap up beaten down shares of Apple, Talisman now: analysts

November 8, 2012

Inside the Market's roundup of some of today's key analyst actions

Canaccord Genuity believes shares in Talisman Energy Inc. are now ripe for investors to snap up following a steep slide in recent weeks.

Talisman has been losing altitude since mid September, partly because the stock is seen as less of an acquisition target in the aftermath of Ottawa's initial rejection of the takeover of natural gas producer Progress Energy Resources Corp. by Malaysia's Petronas. The uncertain future of China's CNOOC attempted takeover of Nexen Inc. also isn't helping.

But Canaccord analyst Phil Skolnick contends that any takeover speculation that was built into Talisman stock – not to mention any expectations for operational improvements at the company – "are now largely washed out."

Mr. Skolnick had downgraded Talisman to a "hold" on Oct. 22. Since that time, its stock is down about 19 per cent and underperformed peers by 16 per cent. He upgraded it to a "buy" today.

"Talisman is the next logical place for money to flow into if a positive decision is made on Nexen and Progress Energy, especially if the new Investment Canada rules are relatively benign when it comes to a company with zero oil sands exposure and assets mostly outside of Canada, like TLM," Mr. Skolnick said in a research note. Canada makes up only 20 per cent of Talisman's estimated 2013 production.

He also noted that Guy Saint-Jacques, Canada's ambassador to China, was recently quoted as saying that he was confident a decision on Nexen will be made by early December.

"With our belief that 'takeout spec' is largely out of the stock, we believe the downside risk to TLM is low in the event Investment Canada provides a negative read–through decision" on the pending takeovers, he said.

Upside: Mr. Skolnick reiterated a $14.25 (U.S.) price target.


Apple Inc. shares continue to track lower today, one day after officially entering a bear market, having dropped 20 per cent from its peak on Sept. 21.

There are at least two analyst reports out today suggesting the selling has been overdone.

Analysts at Oppenheimer said today that despite the market weakness, Apple's competitive position is unchanged. "We're buyers of Apple on recent weakness. We see good potential for a near-term rebound to about $620 before experiencing resistance," Dow Jones quoted them as saying in a research note.

Meanwhile, Brian White, an analyst at Topeka Capital Markets, is maintaining his lofty $1,111 price target. That's more than double the current price and the most optimistic forecast on Wall Street.

"Similar to other corrections in Apple's stock, the fears in the back of investors minds come to the forefront and the bear stories gain credence," Dow Jones quoted Mr. White as saying. "We have heard it before, we're hearing it now and we expect to hear it again in the future.

"However, these concerns have proven dead wrong over the years and based on the product lineup at Apple, we believe they will be dead wrong in the foreseeable future."

Apple shares early this afternoon are trading down $15, or 2.8 per cent, at $542.07 (U.S.).

The average price target among analysts right now is $764 (U.S.), and 88 per cent of them still rate the stock as a buy, according to Bespoke Investment Group.


Investors should hold Rona Inc. shares only if they expect a takeover by Lowe's Cos. Inc. – and that is looking increasingly unlikely, says Desjardins Securities analyst Keith Howlett.

Rona's "very poor third-quarter operating results diminish the probability of a Lowe's bid," he wrote in a research note.

Both companies would benefit by combining forces. "Lowe's has a major problem in Canada, but is likely to be much less confident that Rona is the cure," Mr. Howlett said. "Unfortunately, the results are so poor that we are reducing the probability that Lowe's will pursue a transaction to 33 per cent (from 60 per cent)."

"If a transaction does not occur before January, we think it will not occur," he added.

Downside: Mr. Howlett downgraded his rating on Rona to "hold" from "buy" and his price target to $11 from $15.


Bombardier Inc.'s lower forecast for free cash flow in 2012 and its decision to delay its C Series planes are a reason for concern, CIBC World Markets analyst Kevin Chiang says.

"While the fourth quarter is a big cash inflow quarter, the lowered guidance means concerns over Bombardier's liquidity position to support its product launches will remain an overhang," he wrote in a research note.

Downside: Mr. Chiang cut his price target to $4.75 from $5.50 and maintained his "sector outperform" rating on the stock.


WestJet Airlines Ltd. is on track for solid double-digit earnings growth for at least the next two years, according to Canaccord Genuity analyst David Tyerman.

"We are projecting strong stable margins, which should enable the company to fund its fleet growth and have cash left over for further share buy backs and dividend increases," he said. "Key growth drivers should be moderate B737 fleet growth and the launch of premium economy seating and the Encore regional initiative."

Upside: Mr. Tyerman raised his price target to $29 from $26 and maintained a "buy" rating on the stock. "We project an attractive return for WestJet shares, based on forecast strong EPS growth and a moderate valuation."


Raymond James analyst Andrew Bradford upgraded Calfrac Well Services Ltd. to "outperform" from "market perform," after the company bucked the trend among pressure pumpers by posting better-than-expected third-quarter results. Calfrac also increased a revolving term loan to $280-million from $230-million, which should help it finance more equipment additions.

Upside: Mr. Bradford also hiked his price target to $29 from $25.


For more analyst actions, breaking investing news and analysis, follow Darcy Keith on Twitter at @eyeonequities

(Ads will not print)