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Eye on Equities

Analysts take turns beating up on RIM as earnings approach Add to ...

Research In Motion Ltd. has hardly been a favourite in the analyst community of late, but the research reports being released in the run up to Thursday’s quarterly results have been particularly harsh and prolific.

Today, Canaccord Genuity analyst T. Michael Walkley weighed in once again with channel checks that showed continued weak selling trends for BlackBerry 7 smartphones, despite the company’s increased marketing efforts.

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And he doesn’t see the poor sales performance ending there. “With strong share gains for the iPhone 4S, increasingly price-competitive Android smartphones, improving Windows smartphones, and strong initial sales trends for the new iPad, we anticipate increasing competition across all of RIM’s products,” he said.

Mr. Walkley maintained a “hold” rating and $15 (U.S.) price target. But that almost seems upbeat based on some of the other analyst views that are circulating.

Citi analyst Jim Suva last week reiterated a “sell” rating and $12 price target. While the company did not issue a profit warning this time ahead of Thursday’s earnings, he notes this isn’t surprising given the 80 to 95 cents per share guidance that was well below the original consensus at $1.15.

Barclays analyst Jeff Kvaal, in a note headlined “Grim and Getting Grimmer,” repeated his neutral rating and $12 stock target. His checks, similar to Canaccord’s, indicated current demand is poor, with initial enthusiasm for BlackBerry 7 devices softening.

BlueFin Research analyst Paul Peterson believes RIM will disappoint investors again with its results and report unit shipments toward the low end of its 11 to 12 million unit guidance for the February quarter. He believes RIM’s market share in North America has dropped to below 5 per cent, which could prompt carriers to reduce inventories to no more than a few weeks.

Wedge Partners analyst Brian Blair, as quoted by Barrons, expects earnings of 78 cents for the fourth quarter, a little below guidance. His comments weren't kind: "This is a company that has been lapped in the mobile environment in nearly every way and the most damning news came on the company’s last call: the announcement that there would be no new hardware until late in 2012. All that time means more laps around the company, as neither Android, iOS or Windows Phone are standing still this year."

One analyst sounding a little more upbeat is Sterne Agee’s Shaw Wu. He believes the Street’s low expectations may mean RIM could report a decent quarter and provide guidance that’s not as bad as expected. That, he contends, could mean a near-term relief rally. He remains neutral rated on the stock, however, given growing competition and risks related to the transition to the BlackBerry 10 platform.

It seems like RIM is in no rush to meet face-to-face with all these analysts. Reuters reported late Tuesday that the company has delayed its annual presentation to financial analysts, usually held during the BlackBerry World conference in May, until it launches the BlackBerry 10 new-generation smartphones. A date and location for the meeting have not been decided. RIM said in December it would delay the launch of the BlackBerry 10 until late this year as it awaited new energy-efficient chipsets.

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Even though Genivar Inc.’s fourth-quarter earnings fell short of expectations, Desjardins Securities Inc. analyst Pierre Lacroix sees a bright future for the professional consulting firm. Its recent acquisition of Smith Carter has given the company a foothold in the U.S., and further growth initiatives are under way to meet the company’s target of doubling its size by the end of 2014. “Given its combination of a reasonably attractive valuation, a dividend yield of about 6 per cent and an expected return to our target of close to 20 per cent, we are upgrading GNV to ‘buy-average risk’ (from hold-average risk),” he said.

Upside: Mr. Lacroix maintained a $31 price target.

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Student Transportation Inc. announced six new service contracts for the upcoming school year as it closed $83.9-million in financing under a bought deal. Raymond James Ltd. analyst Frederic Bastien upgraded the stock to “outperform” from “market perform,” noting it was a strong start to the bidding season and more contracts could be on the way. “We continue to admire STB’s strong management, solid strategy, cash flow stability, and attractive dividend (8.2 per cent) within a defensive industry,” he said.

Upside: Mr. Bastien raised his price target by 50 cents to $7.50.

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Canaccord Genuity has identified Comstock Resources Inc. as one of its top picks in the small cap sector. Analyst John Gerdes is encouraged by the company’s recent $166-million in asset sales that will improve liquidity, and its shift to more higher-value oil production.

Upside: Mr. Gerdes reiterated a “buy” rating and $46 price target.

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Analyst Michael Fowler of Loewen, Ondaatje, McCutcheon Ltd. is forecasting shares in International Northair Mines Ltd. will surge 300 per cent over the next 12 months. He believes the company, trading at a large discount to comparable stocks, should be able to outline an inaugural 70-million-ounce silver resource at its La Cigarra property in Mexico when it releases a resource estimate in the second quarter.

Upside: Mr. Fowler initiated coverage with a “speculative buy” rating and $1 target.

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