Research In Motion has had a volatile week of trading with optimists, pessimists and short sellers all weighing in on the prospects of success with its new operating system.
On Thursday, financial powerhouse Goldman Sachs gave RIM a one-in-three chance of success with its new operating system that will be launched on Jan. 30. It upgraded the BlackBerry smartphone maker to buy from neutral, largely based on a "positive risk-reward" of the new operating system.
"A trade or an investment? Time will tell," the New York-based investment firm said in a research note.
"We now assess a 30 per cent chance of success for BB10 given positive early reviews, broad based carrier support, attractive features, and interest by carriers and consumers in broadening the field behind Android-iOS (Apple)."
Shares in RIM (TSX:RIM) closed 4.4 per cent, or 48 cents, higher at $11.48 in heavy trading of 8.7 million shares on the Toronto Stock Exchange. Shares had hit a high of $12.20 earlier in the day.
The share price bump comes one day after the stock fell, then rose, after Nokia Corp. asked courts in several countries to uphold a Swedish arbitrator's ruling that could prevent RIM from using short range WiFi patented wireless technology.
And on Tuesday, RIM shares gave back 10 per cent amid a report that BlackBerry's share of the U.S. market has fallen to just two per cent. That, following a week in which shares ran up dramatically.
Goldman Sachs raised its 12-month price target to US$16 from US$9.
The brokerage said that RIM stock is up 76 per cent from its September low of US$6.31, but is still down 23 per cent on the year and down 92 per cent from its 2008 high. RIM shares hit almost $140 in 2008.
In November alone, the stock has shot up 46 per cent.
But Goldman Sachs noted RIM's bouncing stock has been affected by short sellers who had bet against the company and are moving to cover their positions.
"Given that short interest in the stock is at an all time high of 20 per cent of shares outstanding, we believe short covering has contributed to the sharp bounce off the lows," Goldman Sachs said.
Analyst Brian Blair of New York's Wedge Partners said rising expectations for BlackBerry 10 have provided false hope for RIM's investors.
Blair 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.
Blair said every piece of optimism around RIM's chances of success is a "stretch."
"The fact is, the smartphone market has changed in the last 24 months and RIM is not only late to the party, the party has moved to a different location and RIM is showing up at the wrong house," Blair said in a research note.
Blair said the 80 million global BlackBerry users will be using a new operating system that will be foreign and completely new to them. RIM is expected to introduce a touch screen BlackBerry first and then one with a keyboard.
"This user base has come to love Blackberry’s physical-tactile keyboards and email that is largely unchanged since 1999," he said.
However, RIM's stock also got a boost recently when two Canadian analysts increased their price targets for the shares to $15 and $17, respectively, based on their view that the market had undervalued the company.
Meanwhile, analyst Peter Misek of New York-based Jeffries & Company has said he's giving the BlackBerry 10 operating system only a 20 per cent to 30 per cent probability of success.
But that's an improvement on his previous assessment of 10 per cent to 20 per cent chance of success, a change in opinion that he attributed to surprisingly strong support among some wireless carriers.