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UBS continues to be bullish on Research In Motion Ltd. (RIMM), expecting upside of roughly 20% for the stock due to strong sales for the BlackBerry Pearl.

While analyst Robert Dennison expects strong demand from customers replacing their mobile devices, the new full-size Pearl 8800, which has already begun shipping, could help drive earnings above the high end of RIM’s guidance, he said in a research note.

He has a “buy” recommendation and $170 price target on the stock.

Many industry players feel the smart phone market suffers from under-penetration, something they have expected to change for several years, according to Mr. Dennison.

So will 2007 will be the year for growth?

The market for wireless e-mail and other applications grew 300% in 2006 and could expand further this year, according to an estimate Mr. Dennison got from Visto Corp. at the 3GSM conference in Barcelona.

“We believe the bulk of the growth from RIM’s competitors will materialize in the consumer/prosumer market, which we see as a much bigger addressable market and one in which RIM does not have to be dominant to also see ‘explosive’ growth,” he said.

Mr. Dennison also noted recent speculation that Motorola Inc. (MOT) may acquire Palm Inc. (PALM).

While he does see some merit in such a scenario, he does not see the competitive landscape changing very much as a result.

RIMM 1-yr chart:

RIMM 1-yr chart

Source: Blessing of the Blackberry Pearl: UBS Continues To Be Bullish on RIM