BMO Nesbitt Burns analyst Tim Long has downgraded Research In Motion Ltd. to an "underperform" rating, predicting that the launch of BlackBerry 10 devices later this month will do little to stem the loss of its market share.
Mr. Long, who previously rated RIM as "market perform," also slashed his price target to $9 from $12 (U.S.).
Following a burst of both upgrades and downgrades in the fourth quarter, in the last few weeks analysts have been fairly quiet about offering their latest views on Research In Motion. Predictions on how well received the BlackBerry 10 will be have been mixed.
Mr. Long said he's grown more pessimistic on RIM's fate after leaving the Consumer Electronics Show in Las Vegas – where the company had little presence but where many other industry players were in full display. RIM is planning its own industry gathering to highlight the BlackBerry 10.
"While BB10 should be a meaningful improvement, we are not expecting the new phones to stem market share losses," Mr. Long said in a research note. "We expect further pressure with BB7 products as low-end Android products ramp up."
On the services side, he is concerned about both subscribers and the critical average revenue per user metric. "We are modeling one million fewer BB subs each quarter, which may be too optimistic," he said.
Mr. Long believes RIM's stock price will be largely dictated by the success, or lack thereof, of the BlackBerry 10 device over the next few months – and he thinks investors should get out while they can. In the longer term, he believes the stock will come under further pressure from falling service revenues.
As for the BlackBerry 10, Mr. Long said his checks on the device itself are mixed. "While most agree that the software will be better, it is unclear if it will be differentiated enough to attack iOS or Android," he commented.
While most operators and distributors seem to be looking for a keyboard product, it appears RIM is planning a full touch product first. Meanwhile, Mr. Long does not expect a low-cost BB10 device until calendar year 2014. He expects the initial BlackBerry 10 devices to sell for over $500 (U.S.), which may be too expensive for a large swath of consumers.