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Another upgrade for RIM even as survey stirs new worries

RIM's BlackBerry smart phone

Fred Lum/Fred Lum/The Globe and Mail

Research in Motion Ltd. today scored another upgrade from the analyst community, a further signal Street sentiment for the stock is starting to swing more positive after its recent pummeling.

In what marked a hat trick for Canada's tech giant, Brigantine Advisors became the third research house to raise its rating on RIM after Goldman Sachs and Northern Securities did so earlier this week.

"We are raising our rating on RIM shares to 'buy' from 'sell' in acknowledging what appears to be a gentle improvement in device sell-through as noted by both our checks and Gartner's third-quarter 2011 report," said Brigantine analyst Kevin Dede.

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That Gartner report this week showed RIM enjoyed slightly improved sales levels in the third quarter, with unit sales rising to 12.701 million from 12.652 million in the second quarter.

"The stabilization, we think, points to the resilience of RIM's brand and the loyalty of its customer base that stands at about 70 million, and of course the pent-up demand behind a stale product line recently refreshed with new devices," Mr. Dede commented in a research note.

He also sees the company benefitting from the colossal adoption of smartphones worldwide and is encouraged that its QNX operating system remains on track for release in the March quarter.

Further, he believes the stock's harsh tumble this year leaves it at an appealing valuation, trading almost at book value and only 20 per cent of the price-to-earnings of struggling competitor Nokia.

"We expect RIM to continue to suffer the agony of the steep valuation discount, but incremental improvement in device sales could instigate bottom-dweller interest," said Mr. Dede, who set a $25 (U.S.) price target.

Northern Securities on Tuesday increased its price target to $26 from $18 while raising its rating to "speculative buy" from a "sell."

The highest profile upgrade came Wednesday from Goldman Sachs analyst Simona Jankowski. But she was also the least bullish on the stock, hiking her rating to "neutral" from "sell" and cutting her price target to $18 (U.S.) from $22.

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And the news hasn't been all positive for RIM this week. On Wednesday, wireless specialist iPass released a survey indicating that Apple has ousted RIM's BlackBerry as the top smartphone for mobile workers.

The company's survey of more than 2,300 employees at 1,100 businesses reveals that more than 45 per cent of mobile workers now use iPhones, up from 31 per cent last year. BlackBerry users, however, slipped to 32 per cent, down from 35 per cent in 2010.

"The BlackBerry has not really fallen from the top spot in so much as other smartphones have grown faster," explained iPass, in its report.

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Canaccord Genuity analyst Juan Plessis has downgraded TransCanada Corp. to "hold" from "buy" because of recent share price appreciation. But he added the stock could rally if more certainty is provided regarding the timing and likelihood of the Keystone XL pipeline project.

Downside: Mr. Plessis maintained a $43 price target.

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Enbridge Inc.'s acquisition of a 50 per cent stake in the Seaway crude pipeline system bolsters the company's ability to reach its targeted 10 per cent earnings growth rate through 2015 and beyond, commented Canaccord Genuity's Mr. Plessis. He believes the deal will contribute more than 5 cents to annual earnings per share starting in 2013 and could encourage additional throughput on the company's Mainline system.

Upside: Mr. Plessis upgraded Enbridge to "buy" from "hold" and raised his price target by $1 to $38.

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CIBC World Markets has downgraded San Gold Corp. to "sector performer" from "sector outperformer," citing lower grades that reduced his valuation of the Rice Lake complex in Manitoba. The build up to higher production will take longer than expected, and "as a consequence, we think that the shares will lose some of their appear to growth and value players," said analyst Barry Cooper.

Downside: Mr. Cooper cut his price target by $1.70 to $3.

Canaccord Genuity analyst Wendell Zerb has raised his forecast for annual gold production from Lake Shore Gold Corp.'s Thunder Creek project near Timmins, Ont., after the company released an initial resource estimate of about one million ounces. "While we maintain our neutral 'hold' rating, LSG shares could in the short term outperform in a strong gold market, as well as from near-term resource growth and exploration upside," he commented.

Upside: Mr. Zerb increased his price target by 30 cents to $2.45.

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About the Author
Investment Editor

Darcy Keith is The Globe and Mail's Investment Editor. He has been a business journalist since 1992 and joined the Report on Business in 2010 from Yahoo! Canada, where he was the senior editor of finance. More

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