If the rally in Research In Motion Ltd. began as an early bet on the success of its upcoming BlackBerry 10 platform, it has since morphed into a battle of the analysts.
This is a stock that appears to rely on expert opinion more than anything else, sailing on an upgrade and crashing on a downgrade – suggesting that, shy of any fundamental information on RIM’s next generation of smart phones, opinions are all we have right now.
On Tuesday, RIM sank 10 per cent after Morgan Stanley weighed in on the recent rally, which had sent RIM shares up nearly 100 per cent from their lows in September. The analyst, Ehud Gelblum, argued that BB10 had a low chance of success.
“While some of the new features on BlackBerry 10 seem innovative, we had a similar reaction to Palm’s WebOS when we saw it at CES (the Consumer Electronics Show) in 2009,” he said (via Forbes.com ). “Ultimately we believe BB10 is too late.”
That view came after several high-profile upgrades of the stock, which had given the shares a boost.
Jefferies & Co. a week ago doubled its price target to $10.
This was then quickly followed by National Bank raising its target to $15 from $12, CIBC World Markets hiking its target to $17 from $8, and Scotia Capital increasing its target to $16.80 from $11.20.
Uh oh, could it be that the north-south divide that had separated RIM opinions a couple of years ago is again on the rise? That is, are Canadian analysts turning bullish as their U.S. counterparts remain unimpressed with the stock?
The average Canadian-based analyst who has expressed an opinion on the stock within the past two months has an average price target of $11.92. That is more than 40 per cent above U.S.-based analysts, who have an average price target of $8.46 – and this number does not take into account the eight U.S.-based analysts who no longer have price targets on the stock.
What’s more, the three most bullish analysts (based on target prices) are all Canadian; and the three most bearish analysts are all American.
I have noted before in this space – indeed, it is becoming something of a hobby – that Canadian and U.S. analysts have had very different opinions on the stock, with Canadians being far more supportive of RIM before capitulation set in earlier this year. That support turned out to be the wrong approach.
Are the Canadians now set for some revenge with the release of BB10 early next year? At least the release of the new platform will take away some of the sway enjoyed by analysts and put more power into the hands of consumers, driving a more fundamental approach on the stock.