Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) fell 5 percent at the NASDAQ in pre-market trading on Monday. The stock continued falling another 7 percent after the markets opened but then made a slight recovery.
The sell-off comes in the wake of two big problems for the company: a major downgrade from Goldman Sachs Group, Inc. (NYSE:GS) and pessimism about the U.S. release of the BlackBerry Z10.
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Probably the biggest problem for Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) is its removal from Americas Buy List. Analysts at Goldman Sachs Group, Inc. (NYSE:GS) issued a report to investors this morning saying that they removed it for two reasons. First, they called the BlackBerry Z10’s AT&T launch “disappointing.”
They said that although the handset’s international launch was “solid,” the U.S. launch is “critical” for the company’s “ultimate success.”
The second reason for removing the stock from the key list was because consensus has “moved closer” to their view that the BlackBerry 10 shift would “drive upside” to the company’s average selling prices and margins.
They note that shares of Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) have risen 34 percent compared to the S&P 500, which rose just 10 percent. In addition, the stock is up 8 percent within the last 12 months, compared to the S&P’s 12 percent increase.
Goldman Sachs analysts said Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB)’s success is depending on the BlackBerry 10 launch and its success. They revised their probability of success rating for BlackBerry 10 to 20 percent down from 30 percent. They said the disappointing U.S. launch has reduced their confidence in the platform’s success.
The analysts said they checked 20 different stores and found “a surprising lack of marketing support and poor positioning of the product.” They also noted “limited advertising around the launch.” Their checks indicated fewer than 10 sell-throughs per location per day—sometimes as few as just two or three. The analysts lowered their price target to $17 per share to $19 per share and rated the stock as Neutral.
Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB)’s next earnings report will be out on Thursday, and it’s been rather difficult to tell just how sales of the new BlackBerry handset are going. One of the most recent checks was completed by analysts at Deutsche Bank AG (ETR:DBK) (FRA:DBK) (NYSE:DB). They found that demand may be waning even in markets that were traditionally strong for Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB), including its home turf of Canada and also the U.K. That’s in spite of a massive order for one million BlackBerry devices
The BlackBerry maker is expected to report losses for its fourth quarter this week, and there’s no doubt that the company will face troubled waters ahead. The Consensus is for the company’s report to reveal a 29 cents per share loss with $2.84 billion in revenue. Experts also believe the company will report losses during every quarter in its fiscal 2014 year, although some believe it could become stronger by generating cash flow for itself.
Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) certainly has its share of bulls and bears. ZDNet, for example, considers whether the company will be able to create a niche for itself, thus bringing in substantial profits — even if it doesn’t become the third most popular handset maker after Apple Inc. (NASDAQ:AAPL) and Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930).
As the smartphone market expands, especially in developing countries, we could see a greater number of ecosystems that could be supported, even if some aren’t as popular as others. Only time will tell if you no longer have to be Apple Inc. (NASDAQ:AAPL) or Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) to succeed in the market.