TORONTO – Shares in Research In Motion are overpriced and the BlackBerry maker’s new operating system likely won’t return the company to profitability, says an analyst who has put a “sell” rating on the stock.
Canaccord Genuity analyst Michael Walkley has set RIM’s share price at US$10 — substantially lower than estimated share prices issued by other analysts in recent weeks.
Shares in Research In Motion (TSX:RIM) were down 10 cents to $11.49 after the report by Cannacord Genuity was issued.
While the BlackBerry 10 operating system is more competitive with Apple’s iPhone and Android smartphones, there will be limited consumer demand, analyst Michael Walkley said Monday.
“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,” Walkley wrote in a research note.
“As a result, we downgrade to ‘Sell’ based on our $10.”
BlackBerry 10 will be unveiled on Jan 30 and is widely considered a make-or-break product for the Waterloo, Ont., smartphone maker.
Walkley said RIM will not be able to continue as it is.
“Given our belief that BB10 smartphones will struggle to gain sustainable traction in the highly competitive smartphone market, especially with a launch date post the important holiday season, we believe RIM may eventually sell assets, sell the entire company or materially change its business model to a smaller niche supplier.”
A sum-of-parts analysis attempts to calculate what a company would be worth if some or all of the business were sold, rather than continuing as an independent entity.
Walkley said he values RIM at roughly US$5.27 billion or the sum of $2 billion for the enterprise subscriber base and server architecture and $3.27 billion for its patents, resulting in a $10 price target per share.
Other investment firms such as National Bank and CIBC have increased their share price targets to US$15 and $US17 respectively. Montreal-based MacDougall, MacDougall & MacTier increased its share price to $10 from $7.
But analyst Brian Blair of New York’s Wedge Partners has said rising expectations for BlackBerry 10 have provided false hope for RIM’s investors.
Blair has said he believes RIM is better valued at US$7 to US$8 range, given the uncertainty of its profitability next year and the “high likelihood” of weak sales of BlackBerry 10 devices.