Long embattled handset maker Research In Motion Limited (NASDAQ:RIMM) (TSE:RIM) has received an upgrade from Jeffries. The upgrade, which shifts the recommendation from under perform to hold and raises the price target from $5 to $10, comes approximately two months ahead of the highly anticipated Blackberry 10 launch, slated for January 30th next year.
This upgrade is tied to increased BB10 support from market carriers. Through a quarterly handset survey, Jeffries has established that most market carriers are viewing the BB10 in positive light. In the same breath, Jeffries is inclined to believe that the increased positivity from carriers, coupled with a greater carrier shelf space, presents a 20-30 percent probability of success for BB10.
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Jeffries also pointed out that the risk/reward ratio was more balanced than before, citing three possible scenarios tied to the BB10. From one angle, Jeffries foresees a 20-30 percent success rate for the BB10- a scenario that has a 20 percent possibility. It further adds that the ultimate determinant of success will be consumer demand. On the same note, Jeffries also believes that the BB10 may push Research In Motion Limited (NASDAQ:RIMM) (TSE:RIM) to a $43 stock in 12 months.
Secondly, Jeffries argues that Research In Motion Limited (NASDAQ:RIMM) (TSE:RIM) might be sold, if the BB10 fails to gather momentum, contending that the sale may likely be a take-under at $5-$7. This second scenario also has a 20 percent possibility of materializing.
The third scenario, which has a 60 percent possibility, is a BB10 failure. If this scenario materializes, Jeffries contends that the cash burn will continue and the share price will ultimately be pushed toward $0.
Positive Response Comes as a Surprise
Jeffries is notably surprised by the positive response from most carriers. It argues that it expected a more muted response considering Research In Motion Limited (NASDAQ:RIMM) (TSE:RIM)’s past rickety performance that saw its market share dip from 20 percent to 5 percent. Similarly, Jeffries earlier thought that the BB10’s two year delay would negatively affect the outlook from carriers. Nevertheless, Jeffries still considers BB10 to be Research In Motion Limited (NASDAQ:RIMM) (TSE:RIM)’s last chance to make significant inroads in the current market.