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A Research In Motion BlackBerry Storm (LUCAS JACKSON/LUCAS JACKSON/REUTERS)
A Research In Motion BlackBerry Storm (LUCAS JACKSON/LUCAS JACKSON/REUTERS)

Market Blog

RIM tanks; analyst cuts price target 38% Add to ...

Shares of Research In Motion Ltd.plunged 12 per cent in Frankfurt after it cut its profit outlook and even Canadian analysts, normally the most loyal, started giving up on the iconic tech firm.

"We've lost confidence in RIM and don't see this as a one-time miss," wrote National Bank Financial analyst Kris Thompson in a research report. "We've heard for too long about RIM's great product roadmap. Consumers are not listening nor waiting."

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"Our thesis on investing in this stock was based on a massive end market that a smartphone incumbent like RIM should be able to navigate, and grow EPS. RIM does not seem to be up to the challenge. Consumers are voting with their dollars, and they're being spent in Apple stores and on Google's Android platform. RIM does not even seem to have dual cameras on its upcoming BlackBerry product line-up. The last time we checked, video is the future. We're shocked that the company might be missing this simple trend in favour of 'liquid graphics' and near-field communications."

Mr. Thompson cut his rating on the stock to "sector perform" from "outperform" and slashed his price target to $50 (U.S.) from $80.

The Waterloo, Ont., company said late on Thursday that it expects to earn between $1.30 and $1.37 per share in the first quarter. That is 7- to 16-per-cent lower than a forecast it released to investors in late March, which called for earnings of $1.47 to $1.55 per share.

RIM blamed the outlook on a shift in its sales mix. While it still expects to sell at least 13.5 million BlackBerry smart phones during the quarter, a growing percentage of those are lower-priced devices, which do particularly well in overseas markets. Delays in product testing and certification mean that RIM's newest high-end phones - expected to be unveiled at the company's annual conference in Orlando next week - will be a few weeks late to market, further hurting RIM's sales in the quarter.

Mr. Thompson's report included headings such as: "Throwing in the towel for now: can't recommend this stock with company's poor execution" and "Investors don't care about RIM's seemingly cheap valuation."

Of the 52 analysts covering RIM, 23 rate it "buy," 20 rate it "hold," and nine rate it "sell," according to Bloomberg data. That compares with 48 "buy" ratings for Apple Inc. , five "holds" -- and zero "sell" ratings. The score for Google Inc. is 34 "buy" ratings and seven "holds."

UBS maintained its "neutral" rating and $63 price target on RIM.

Raymond James analyst Steven Li cut his target price to $71 and maintained his "outperform" rating. He said the QNX operating system, "is finally something that is fast, fluid with amazing multitasking that we think should compete well" against Apple's iOS and Google's Android.

"However, in the near term, RIM's shares could just tread water until we get some positive data points on either PlayBook or emerging markets or if BlackBerry 7 manages to surprise the skeptics next week at BlackBerry World."

 
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