These are stories Report on Business is following Friday, Jan. 18, 2013.
RIM climbs again
Shares of Research In Motion Ltd. climbed sharply today, by about 7 per cent to close in Toronto at $15.71, continuing a dramatic run as the launch of the BlackBerry 10 draws nearer and amid an upgrade from a key stock analyst.
The latest bit of juice for RIM is a report from analyst Peter Misek of Jefferies & Co., who boosted his price target on RIM shares to $19.50 (U.S.) from $13, and his recommendation to “buy” from “hold.”
The stock has seen five particularly good days, closing out yesterday in Toronto trading at $14.68 (Canadian) compared to under $12 last Friday.
It’s also a sharp climb from its 52-week low of $6.10, though still below the high of $18.23.
Mr. Misek said, among other things, that RIM will enable corporate e-mail on Apple Inc.’s iPhones and devices powered by the Android system from Google Inc.
“This change we believe is unknown or not well understood but is important,” he said.
He also projected a couple of quarters of earnings that could be “well above” the estimates of other analysts, at the same time noting “guaranteed volumes” from wireless carriers.
“Our checks indicate that the carriers have agreed to volume commitments for the first two quarters post-launch,” Mr. Misek said.
“Our checks indicate that BB10 builds have been raised from 500,000/month in early December to 1 million to 2 million/month,” he added in his report.
“Developers are supporting BB10 more than we expected. RIM is targeting 70,000 apps available at launch.”
His take on the opportunities for investors is interesting. Not only can shareholders win with a “successful software business” related to the iPhone iOS system and Android, also because there’s a huge short interest in RIM shares, and expectations that are too low “could start a squeeze.”
Mr. Misek has a few scenarios, one more fortunate than the others.
In his first scenario, the chance of success for the BB10 has climbed.
“In December our quarterly survey of carriers and retailers … showed that 20 per cent of respondents thought that Blackberry would be the third mobile ecosystem behind iOS and Android,” he said.
“Since December, our checks indicated better-than-expected carrier and develop support. We now think the chance of success has risen closer to 30 per cent.”
The second scenario suggests RIM will have “few strategic options” beyond a sale of the company should the BB10 not succeed.
“Due to the likely 9-24 month investment and integration timeframe before an acquirer could launch BB10 on their own hardware, we think any acquirer will be price sensitive,” he said.
“Additionally, as an unsuccessful BB10 will leave RIM likely burning cash and without a Plan B, we think RIM will have to settle for a lower-than-hoped for acquisition price.”
The third scenario is downright ugly: “BB10 fails, no acquisition, and continued cash burn leads the stock toward $0.”
It’s on the “weighted probability” of his three scenarios that he boosted his target on the stock.
Before today, the latest push for the stock came with RIM’s announcement Wednesday that Visa had approved how it will handle mobile payments.
In the lead-up to the BB10 launch on Jan. 30, not everyone is as keen as Mr. Misek.
BMO Nesbitt Burns analyst Tim Long, for example, slashed his price target on the shares to $9 (U.S.) from $12 just a week ago, rating the stock “underperform.”
China picks up at year-end
China’s economy expanded by 7.8 per cent last year, according to official data released today. That would be exceptional for anyone else, but for China it’s the slowest pace in 13 years.
Still, today’s reading buoyed investors because it showed growth speeding up in the fourth quarter of the year, to 7.9 per cent, year over year, compared to 7.4 per cent in the third quarter.
That, said Bank of Nova Scotia, is “gently supportive of the view that China’s economy strengthened a tad at the end of the year.”
As Carolynne Wheeler reports from Beijing, however, there’s a wealth gap in China that’s a trouble spot, growing larger between the rural poor and city middle class and wealthy.
Canada’s manufacturing sector scored a good November, with sales climbing 1.7 per cent to the highest since last May.
The gains in the country’s factories were led by the transportation equipment, metals and chemicals industries.
Sales climbed in just 12 of the 21 sectors measured, but they accounted for about two-thirds of the group, Statistics Canada said today.
“Constant dollar sales rose 1.6 per cent, indicating that most of the gain in manufactured goods sold was a result of higher volumes,” the agency said.
At the same time, Statistics Canada revised October’s reading, to find sales had slumped by a smaller 1.2 per cent.
“The month’s gains were driven by the transportation sector, which has been supported in recent months by rising U.S. auto sales and new model introductions,” said economist Emanuella Enenajor of CIBC World Markets.
“Reflecting the tilt towards robust auto production, Ontario posted a healthy 3.8-per-cent increase on the month.”