Canaccord Genuity Downgrades RIM to ‘sell’
Yesterday we reported how financial analysts are see-sawing about RIM’s prospects and that trend certainly seems to be continuing.
Canaccord Genuity analyst T. Michael Walkley has become the latest analyst to weigh in on Research In Motion’s turnaround prospects with the arrival of its BlackBerry 10 devices – and he’s not optimistic.
Mr. Walkley downgraded RIM today to “sell,” arguing that “fundamentals” do not support the stock’s recent share price appreciation.
His price target is $10 (U.S.), which is $2 higher than his previous projection made in June.
“While initial sales of higher-ASP (average selling price) BlackBerry 10 smartphones should improve RIM’s January and May quarter device sales and ASP mix, our checks and analysis of the global competitive landscape suggest a very low probability BlackBerry 10 sales can turn around RIM’s long-term business trends,” Mr. Walkley said in a research note.
“While we believe BB10 is a dramatically improved user experience versus BB7 and RIM’s new hardware is more competitive with higher-end smartphones, our checks do not indicate the consumer pull, carrier push or developer excitement necessary for BlackBerry 10 to reverse the challenging trends faced by RIM in order to return the company to sustained profitability,” he said.
“We do not believe BB10 will return RIM to sustained profitability.”
Also troubling is that Canaccord’s latest checks with carriers suggest consumer demand for RIM’s existing smartphones is on the wane.
“Our November checks indicated very weak global sell-through trends for BlackBerry 7 smartphones with many Western carriers stocking minimal inventory levels due to soft demand. Further, our checks indicated strong iPhone 5 and high-tier Android smartphones sales with little channel excitement about the January BB10 launch.
The popularity of BlackBerry products in emerging markets is often cited as a factor working in RIM’s favour. Yet, Mr. Walkley’s checks suggest increasing momentum for Android smartphones selling for less than $200 (U.S.) in emerging markets, and he expects increased competitive pressure for BlackBerry 6 and 7 models overseas.
“While our checks indicate BlackBerry is still very popular in certain international markets such as Indonesia, India, Venezuela, and several others where BBM loyalty remains strong, we believe RIM’s share in these markets may be unsustainable given the increasing Android competition,” he said.
The Street is deeply divided on RIM’s chances for success with the BlackBerry 10. Some analysts, including those from Goldman Sachs, CIBC World Markets, Jefferies & Co. and National Bank suggest the stock’s risk/reward ratio has become more favourable with the BlackBerry 10. Many others, including Morgan Stanley and Wedge Partners, suggest it’s too little, too late.
RIM shares, which initially opened down nearly 2 per cent, are trading near unchanged at mid-morning.