RIMM Up 17% On the Week
Research In Motion (RIMM) surged on Friday, pushing its YTD gain to 25% and its three-month performance through 100%. The most recent pop in the Waterloo based smartphone maker, no doubt assisted by the over 30% short interest, was attributed to an upgrade by prominent Jefferies Analyst Peter Misek, according to a Reuters report.
The rock star status previously afforded sell-side forecasters has no doubt diminished since the dot-com bubble and the days of Analyst Henry Blodget commanding the headlines. Nonetheless, there is no other sector on Wall St. where analysts seem to hold as much influence over the price of the companies they cover as in Technology. In a market environment where product pipelines and carrier orders drive company valuations, prominent researchers often drive the price action of the stock.
Needless to say, the steady five year slide in RIMM shares has been painful for longtime investors of the company. While the recent signs of life may be reassuring for long suffering holders of the name, another two or three moves up of a similar magnitude will be required for many shareholders to break even. The stock will need to double, double again, and then double once more for those unfortunate enough to have bought and held RIMM since its peak in 2008. However, with a little help from Wall St. analysts, the share price could be making a move back up the chart in coming months.
RIMM Performance - The Last 5 Years have not Been Kind
(Chart Courtesy of: MarketWatch.com)
Analysts Wag the Dog when it Comes to Tech Stocks
Once the darling of Wall St. prognosticators, back when the stock was trading in the triple digits, RIMM no longer feels the love from the influential tech analysts whom hold so much sway. A quick look at analyst recommendations shows that only 6 of the 44 covering RIMM have it rated a Buy or higher. While this is an improvement over the lonely 4 analysts that had a positive rating three months ago, sentiment remains largely negative towards the company.
In a world that is all Apple (AAPL) all the time, both at shopping malls and with Wall St. investment banks, RIMM has been all but forgotten. Of course the company's operating performance has not helped matters. Phones using Google's (GOOG) Android certainly get some headlines, but much of the adoration is saved for AAPL. Which brings us to the questions: Has RIMM's long stay in the penalty box come to an end? Can the company start eating some of AAPL's pie?
Is it RIMMs Turn for Some Praise from the Street?
Projecting unit sales or evaluating operating systems is better left to those more qualified in assessing the notoriously unpredictable smartphone market. Adam Levine-Weinberg recently put together an excellent piece on these and other topics pertaining to RIMM. He makes a compelling bull case that challenges the bearish Street consensus.
As far as RIMM's return to relevance on morning sales calls, and in the financial press, we do have some visibility. The much anticipated launch of the BlackBerry 10, a surging share price, and recent dents to the previously impenetrable armor of Apple make for the best story line the company has had in years. At some point, possibly very soon, the once dominant smartphone maker is going to push its way back into market share discussions.
One should certainly take advice from any sell-side firm with a grain of salt; it is fair to say their interests are not always aligned with those of the average investor. Nonetheless, when it comes to the titans of technology, one would be tempting fate to not consider sell side opinion when making trading or investing decisions.
RIMM remains a far cry from once again competing seriously with its formal rivals. However, after recent developments, it is reasonable to say the competition is paying a little more attention to the Canadian company then they were six months ago. Wall St. has perked up as well. The upgrade by Peter Misek may well be the first in a wave of new analyst upgrades, and some words of encouragement for the BlackBerry maker.
RIMM Target Prices too Low
Like most market indicators, the pendulum of analyst sentiment generally over shoots the mark in both directions. Currently, the stars seem to be aligned for the much maligned RIMM to enjoy a swing to positive guidance from Wall St.
With a mean target price of just $10 from those that cover RIMM, and the stock pushing $16, something is going to have to give in the near future. The coming weeks will tell, but recent events suggest that RIMM will be the recipient of some optimistic coverage, and receive some sorely needed market attention, for the first time in what seems like an eternity.
Welcome back to the conversation RIMM, you've just been upgraded.