Lowered Expectations: RIM Gets Momentary Stock Bounce

by Jordan Richardson on November 26, 2012

The market is a funny, capricious mistress. Research In Motion’s recent up-tick in stock fortunes exemplifies this beautifully, with the company enjoying a slight spring in its proverbial step after investors got a look at BlackBerry 10 products.

RIM’s executives are preparing for a global launch in January of 2013, but some key investors like what’s coming to the extent that they’ve actually upgraded the company’s stock. The implication seems to be that there’s money to be made out of the Waterloo company, even ahead of the product launch, and some wise investors may want to get in while the going is good.

On Thursday, in response to the newfound assurance, RIM’s stock took a jump of over 17 percent to land at $12.03. By press time, things seem to have moved more down to earth with a drop of 3.25 percent to $11.61. Still, the leap is notable.

National Bank Financial analyst Kris Thompson was one of the optimistic analysts. He upgraded his RIM price targets to $15 a pop, suggesting that “new” CEO Thorsten Heins seems ready to deliver a solution or two to the company’s considerable problems.

“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,” Thompson wrote in a research note to clients. “Most analysts were expecting a March launch.”

Peter Misek of Jefferies & Co. was another optimistic analyst. He actually doubled his price target to $10 and moved the stock to the optimistic category of “underperform,” up from its previous landing in the “hold” category. Misek added that RIM had a probability of success in the neighbourhood of 20 to 30 percent.

In essence, RIM is being conveniently rewarded based on the clearly distant possibility that it could exceed lowered expectations. It’s still expected to miss the mark, but it’s just not being expected to fail as much by as many. Like a floundering student predicted to frantically flunk a critical final exam, expectations are so low as to warrant pizza and a movie for anything less than abject failure.

Some analysts are thankfully more cautious. “RIM is one of those fallen angels where people are latching on to any good news they can,” said Neeraj Monga at Veritas Investment Research. “I’ll wait to hold the first BB10 phone in my hand before I change my sell opinion.”

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Written by: Jordan Richardson. www.digitcom.ca. Follow TheTelecomBlog.com by: RSSTwitterFacebook, or YouTube.

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