RIM Rally Gets More Juice After Goldman Upgrade - Wall Street Journal (blog)

By Steven Russolillo

Research In Motion is quickly becoming a loved name in the analyst community.

Goldman Sachs is the latest to jump on the bullish train, boosting its rating to buy from neutral and lifting its price target to $16 from $9. The firm, as others have, cited growing optimism around RIM’s new smartphones, which are expected next year.

“For the first time in three years, we think out-year Street estimates are too low,” Goldman analysts wrote in a note to clients Thursday morning

Shares jumped 6.3% to $11.80. Through Wednesday’s close the stock was up 76% over the last two months, although it still remained down 23% for the year.

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The firm says RIM’s BlackBerry 10 launch has a 30% chance of success, which apparently is good enough compared to the company’s recent failures around new devices and product upgrades.

Goldman justifies its upgrade by saying much of the stock’s recent run-up is likely due to short covering, meaning the rally could have legs if the fundamentals keep improving.”Given that short interest in the stock is at an all-time high at 20% of shares outstanding, we believe short covering has contributed to the sharp bounce off the lows,” Goldman says.

And in the scenario that BB10 proves to be a bust, Goldman is still optimistic about RIM’s chances.

“Even if BB10 is ultimately not successful (which is our current base case scenario, at 70% probability) we expect RIMM to outperform over the next 2-4 quarters,” Goldman says, as it expects expects higher average selling prices and improving margins following the BB10 launch.

Earlier this week, CIBC World Markets boosted its RIM price target to $17, from $8, saying the company was “materially undervalued.” Last week, National Bank and Jefferies & Co also issued bullish commentary on RIM, which have helped fuel the stock.

But not all analysts have been optimistic Morgan Stanley maintained this week that the stock remains “un-investable” in the near-term.

The fact remains RIM finds itself battling with the likes of Apple Inc. Microsoft Corp. and Google Inc. , among others, in the crowded smartphone market.

While shares have shot higher over the last few months, the company will need to prove it gain regain traction in smartphones for this rally to prove to be sustainable.

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