Investors are taking a second look at Research In Motion Ltd.
The company's battered stock is surging on new-found optimism about its upcoming BlackBerry 10 smartphones, which are central to the company's hopes of reversing more than a year of catastrophic losses in market share.
RIM executives are now parading the touchscreen devices in front of wireless operators and financial analysts as they prepare for a global launch event Jan. 30, 2013. And so far, the market likes what it sees.
Two influential analysts this week upgraded the stock, saying there is money to be made ahead of the launch date, and RIM shares jumped more than 17 per cent to $12.03 on Thursday. That was the biggest one-day increase since RIM began a two-month tear in late September; the company's shares have nearly doubled in that time, adding $3-billion in market value.
There is still no certainty about RIM's long-term prospects against larger rivals such as Apple Inc. or Samsung Electronics Co. Ltd., but sentiment around the company is beginning to change.
National Bank Financial analyst Kris Thompson upgraded his price target to $15, betting that the stock will rise further as it becomes clear that new chief executive officer Thorsten Heins is fixing one of the company's biggest problems – an inability to deliver a competitive new BlackBerry to the market on time.
"The new management team is executing by maintaining the BlackBerry subscriber base, managing costs and cash, and seemingly readying a February 2013 BB10 global platform launch," Mr. Thompson wrote in a research note to clients. "Most analysts were expecting a March launch."
Earlier this week, Peter Misek of Jefferies & Co. doubled his price target to $10 and upgraded the stock to "hold" from "underperform."
The new BlackBerry 10 attempts to capitalize on the popularity of touchscreen devices such as the iPhone. RIM's first new device eliminates the physical keyboard in favour of a touchscreen – one that guesses what the user is typing. It also features a new interface that lets the user move between software applications without closing any of them, and the ability to "slide" applications to the side to look at new e-mail messages. A BlackBerry 10 phone with a physical keyboard will be released shortly after.
"[C]arriers have a much more positive view of BB10 than we expected," Mr. Misek wrote. He said the device has a 20-per-cent to 30-per-cent probability of success: "While the likelihood is low … the potential reward is high."
In the most recent quarter, RIM surprised analysts by announcing its global subscriber count had crept up to more than 80 million BlackBerry users when most were expecting a stall or a drop-off. At the same time, Mr. Heins has been cutting costs, partly through layoffs of about 5,000 employees, and RIM's cash pile has increased to about $2.3-billion.
RIM's rally comes with at least one caveat: The rebound only looks good because of how low the share price had fallen by mid-September. Even with the recent gains, the price remains 92 per cent below its 2008 high.
Neeraj Monga at Veritas Investment Research said much of the recent rise is purely speculative. "RIM is one of those fallen angels where people are latching on to any good news they can," he said. "I'll wait to hold the first BB10 phone in my hand before I change my sell opinion."
Yesterday's stock bounce is likely to have caught some U.S. investors off guard, given that American markets were closed for Thanksgiving. (RIM is listed on the Nasdaq in the U.S.)
However, most sophisticated U.S. investors are likely to be the least affected. Typically, major investment banks and portfolio management companies ask a junior staff member to work a holiday, in the event something like this happens. Plus, investors who shorted RIM's stock – hoping to make money off a lower stock price – likely implemented what are known as stop losses, which automatically reverse the investor's position once the stock crosses a certain trigger level.
With files from Tim Kiladze