By Angus Robertson
Analysts have been scrambling the last couple of months to “adjust” their ratings and price targets to reflect Research in Motion’s (RIM) slide. Using Alacra Pulse, we take a look at which analysts had the best (or least bad) record in anticipating the BlackBerry maker’s decline, and what they are now saying abut the company’s prospects.
RIM closed Wednesday at $28.40, less than half its value of a year ago when the median analyst 12-month price target was $85. The current median is $31, based on analysts tracked by Pulse, with targets ranging from $20 to $60.
More than a year ago we noted RBC Capital analyst Mike Abramsky’s consistently bullish view of RIM, a view he held until he admitted in April he had got it wrong. We have also commented on the generally rosier views of Canada-based analysts than their counterparts elsewhere.
So if you can’t rely on Canadian analysts on a Canadian company, who should you pay attention to? No analysts foresaw RIM dropping below $30, but a few at least had the trend right.
Citigroup’s Jim Suva had a Sell rating on the company in June of 2010 and lowered his 12-month price target to $50 from $55, presciently noting that RIM’s presence in the corporate world could come under pressure as some companies were beginning to allow employees to switch to the iPhone or to Android-based devices.
Morgan Stanley’s Ehud Gelblum downgraded RIM to Underweight in August and halved his target price to $47 from $95. He said the firm could lose market share at a faster pace than previously expected.
Pierre Ferragu at Bernstein Research cut his 12-month price target from $55 to $40 in September, at the time the lowest among sell-side analysts tracked by Alacra Pulse. He said findings of a survey of 200 UK and US companies found “a scary outlook” for RIM in the corporate market.
Susquehanna’s Jeff Fidacaro had a Negative rating on RIM a year ago and a a price target of $37.50.
In March it looked like Ferragu, Gelblum and Fidacaro were too negative, but they have been vindicated.
So what are these analysts saying now?
Fidacaro still has a Negative outlook, with a $31 target. “We have increased concerns regarding the sharp decline quarter-over-quarter in smartphone gross margin, much lower software and other revenue possibly signaling share loss in enterprise, and an accelerated decline in the U.S,” he wrote in a note to clients.
Citi’s Suva has cut his target to $25 with a Sell rating, saying there are “no guarantees that RIM has compelling products for the holiday season,”
Morgan Stanley’s Gelblum retains his Underweight rating, saying “We believe RIM has now squandered nearly every opportunity and competitive advantage it enjoyed through ineffective R&D resource management, delayed product launches and misreads of the competitive environment.”
Bernstein’s Ferragu, who has an Underweight rating, cut his target to a low of $20, saying the company is “now on an accelerated decline trend that should take the company’s earnings close to $4 this year and well below next year.”
Doesn’t look good for a turnaround.Sources: Alacra Pulse, Reuters, Barron’s Tech Trader Daily, Forbes, The Star (Toronto), eWeek, MarketWatch.