RIM target prices factor in white knight scenario

Tue Dec 6, 2011 12:53pm EST
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TORONTO (Reuters) - For most brokerages, the question is not whether to cut their price targets for Research In Motion but by how much.

Analysts who see the possibility of a white knight emerging for the struggling BlackBerry maker have favored a target higher than its current trading level of about $17 a share.

For those who see no end in sight for RIM's downward spiral, the target tends to be much lower, especially after Friday's damaging profit warning.

One of those in the latter camp is National Bank Financial, which already recommends avoiding the stock. On Tuesday it cut its target to $10 from $16 on the pessimistic view that a deep-pocketed savior will not step forward and RIM will not itself arrest declining market share, gross margin and earnings.

"We have little confidence that any management team could save RIM in its current form," analyst Kris Thompson said.

Others, such as CIBC and Paradigm Capital, have slashed but only to a point above RIM's current valuation. Many argue the Canadian company would make a viable strategic takeout target or a buyer could break it up and sell off in parts.

Most are using Friday's warning as a peg to redress their own misplaced optimism after the stock plunged 10 percent.

"Target changes are almost completely pointless. They usually indicate that an analyst is trying to play catch-up to what's happening to the ticker tape," independent analyst Chris Umiastowski wrote on his blog last month.

He can afford to be honest these days, after 10 years working in equity research, most recently for TD Newcrest.   Continued...