RIM: Canaccord Says Sell on Stock Surge; Sterne Agee Sees Mixed Outlook

The Street this morning has some more cautious words regarding Research in Motion (RIMM), as the company looks toward the introduction of its “BlackBerry 10” operating system update to the BlackBerry, expected to debut publicly on January 30th.

RIM shares are down a penny at $11.59.

Canaccord Genuity’s Mike Walkley cut his rating on the shares to Sell from Hold, while raising his price target to $10 from $8, writing that the recent surge in the stock price doesn’t have support because although BB10 hardware and software is a “dramatic improvement,” there won’t be enough momentum to help RIM much:

Over the past month, RIM shares have markedly increased ahead of the January 30 launch of long-awaited high-tier BlackBerry 10 smartphones. While initial sales of higher-ASP BlackBerry 10 smartphones should improve RIM�s January and May quarter device sales and ASP mix, our checks and analysis of the global competitive landscape suggest a very low probability BlackBerry 10 sales can turn around RIM�s long-term business trends. Our checks indicate high-ARPU consumers continue to switch from BlackBerry to sticky iPhone and Android ecosystems in droves, BYOD trends continue to lower RIM�s higher-ARPU enterprise base, and sub-$200 3G Android smartphones in emerging markets threaten RIM�s global sales and subscriber base. While we believe BB10 is a dramatically improved user experience versus BB7 and RIM�s new hardware is more competitive with higher-end smartphones, 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. As a result, we downgrade to SELL based on our $10 sum-of-parts analysis.

Walkley takes his cue from his “checks” of smartphone sales globally in November, which still show Apple (AAPL) and Samsung Electronics (005930KS) making large strides in the market:

Our November channel checks indicated seasonally stronger smartphone sales with very strong sales of the iPhone 5 at AT&T, Verizon, and Sprint and also in international markets with dramatically improved supply. Our checks also indicated solid sales of legacy iPhone 4S/4 models at reduced prices. While our checks indicated strong iPhone sales, our checks also indicated very strong Samsung Galaxy S III sales at all four tier-1 U.S. carriers along with strong Note II sales.

Sterne Agee’s Shaw Wu, on the other hand, writes that investors have asked him if the company’s fortunes have changed, to which he replies “yes and no.”

Wu, who has a Neutral rating on the stock, writes that it’s not clear if there’s really room for another major operating system platform besides Apple’s iOS and Google’s (GOOG) Android, and it’s not clear whether RIM’s cash can sustain heavy losses for long.

But he also thinks estimates are low enough there’s some chance RIM can surprise positively, and carriers are at least interested in some immediate counterbalance to Apple and Google:

Looking at consensus estimates and triangulating data points from our supply chain checks, we agree with the assessment that some have made in that RIMM may post upside relative to overly pessimistic expectations. For FY13, we are modeling $11.3 billion in revenue and a loss of $1.05 in EPS vs. consensus estimates of $11.1 billion and a loss of $1.26 and for FY14, $11.9 billion and ($0.50) in EPS vs. consensus at $11.2 billion and ($0.55) in EPS. However, with shares rallying a bit off the bottom, it is not clear if expectations remain low [�] The most important metric we think remains is its $2.3 billion cash balance which the company has been able to sustain despite big operating losses through changes in working capital and its conversion of accounts receivable. It is not clear how sustainable this is as this is an accounting maneuver as opposed to an improvement in its fundamentals [�] As we have said in early November (see our 11/02/12 note), we continue to pick up carrier interest in BlackBerry 10. From our understanding, the rationale is simple. Carriers are growing increasingly leery with the growing dominance of iOS and Android and have been looking for a viable 3rd or potentially 4th platform with the hope that either BB10 and/or Windows 8 takes off.

Today’s reports follow an upgrade by�Goldman Sach‘s�Simona Jankowski�from Neutral to Buy last Thursday, cautious words from Evercore Partners’s Mark McKechnie on Wednesday, and negative reports from�Macquarie Research�and�Morgan Stanley�a week ago.