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RIM stock up sharply on week, but eases off as U.S. catches up

These are stories Report on Business is following Friday, Nov. 23, 2012.

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RIM's Thanksgiving (as in: Thank you, National Bank analyst)
Shares of Research In Motion Ltd. gave up some of their huge gains in trading in Toronto today, though climbed sharply in the United States as American investors caught up after the Thanksgiving holiday.

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Still, the stock is on a clear role over the last several days, and well up from the 52-week low of $6.10 on the Toronto Stock Exchange.

As The Globe and Mail's Iain Marlow reports, RIM shares have popped on optimism surrounding the launch of its BlackBerry 10 smartphones, scheduled for the end of January.

The shares have been rising, and took off yesterday as National Bank Financial analyst Kris Thompson hiked his price target on the stock to $15 (U.S.) from $12. That followed a move earlier in the week by analyst Peter Misek of Jefferies & Co., who doubled his target to $10.

All of this has to do with the optimism surrounding the launch of BB10, and how chief executive officer Thorsten Heins appears to be on track with what he promised to do.

As Mr. Thompson sees it, investors should buy RIM shares in the run-up to the launch, getting out in front of what he expects will be stronger sales estimates among other analysts after the new devices begin selling.

He has already boosted his sales estimates for fiscal 2014.

Mr. Thomspon is not alone.
Eric Jackson, the president of Ironfire Capital LLC, told Bloomberg News yesterday he recently purchased RIM shares in anticipation of BlackBerry users upgrading to the new models next year.
"Most are greatly underestimating how many loyal subscribers will upgrade to BB10 in calendar 2013," Mr. Jackson said. "All those pending upgrades are currently not factored into the stock."

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Attention, shoppers
Black Friday shoppers are off and running in the United States. And in Canada, too, for that matter.

Several U.S. retailers got off to an early start, as did some Canadian malls, The Globe and Mail's Marina Strauss reports.

There's always a morbid fascination on Black Friday with reports of people being trampled, or worse, though, so far, we haven't seen much.

Last year, one Wal-Mart shopper pepper-sprayed fellow shoppers so she could beat them to an electronics sale, while another was shot in the foot during a robbery outside a store.

"Black Friday sales data will come streaming in through the weekend, but don't expect reliable guidance on consumer spending trends, as changing store hours, new products and varying promotions can distort the year-to-year changes in early holiday spending," said senior economist Sal Guatieri of BMO Nesbitt Burns.

"U.S. real consumer spending rose 2 per cent annualized in 2011Q4 and likely held to this modest pace in the current quarter, as improved household finances and confidence is tempered by still-modest job growth and potential looming tax increases in the new year," he said in a research note.

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"In Canada, less borrowing in the face of elevated debts will dampen the holiday spirit. Note that retail sales rose just 1.8 per cent year-over-year in September, and half of the increase was due to new automobiles … which aren't exactly the cheapest thing to give."

Inflation tame
Consumer prices in Canada rose 0.3 per cent in October from a month earlier, while the annual inflation rate held steady at 1.2 per cent.

On an annual basis, energy prices rose at a slower pace last month, while the cost of flying, buying food and paying property taxes rose.

The so-called core rate, which excludes volatile items and help guide the Bank of Canada's monetary policy, also held steady in October, at 1.3 per cent, Statistics Canada said today.

All in all, there's absolutely nothing to change Bank of Canada Governor Mark Carney's mind on anything.

"Although today's number was a touch above expectations, inflation for the quarter is still set to track below the 2-per-cent [Bank of Canada target] and the Bank of Canada's earlier expectation of 1.5 per cent," said Emanuella Enenajor of CIBC World Markets.

There are several factors at play, among them competition at the shopping mall, which, as noted, is also playing out in Black Friday sales today.

"Inflation was somewhat firmer than expected in October, but a strong loonie and heightened retail competition (domestically and from the lure of cross-border shopping) have worked to keep a firm lid on Canadian prices, leaving the Bank of Canada little to worry about on this front," said Robert Kavcic of BMO Nesbitt Burns.

S&P stands firm on France
Standard & Poor's reaffirmed its ratings on France today, in the wake of an earlier downgrade by Moody's Investors Service.

S&P had already cut its rating, and held it there in a second look.

"The affirmation reflects our opinion that the French government remains committed to budgetary and structural reforms that would build on the measures it has proposed so far and improve the country's growth potential," S&P said.

"In particular, in the face of uncertain economic growth prospects, the government has already taken steps toward restoring competitiveness … and toward compliance with its medium-term budgetary targets."

Its outlook for France is still "negative," which means a one-in-three chance of a downgrade next year.

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About the Author
Report on Business News Editor

Michael Babad is a Report on Business editor and co-author of three business books. He has been with Report on Business for several years, and has also been a reporter and editor at The Toronto Star, The Financial Post and United Press International. His articles have appeared in major newspapers around the world. More


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