Research In Motion Limited (USA)(NASDAQ:RIMM) is suddenly attracting a lot of interest from analysts some of whom are upgrading the stock and raising its target price and others who feel that the company may not be able to sustain itself in the face of competitors who offer subsidised services.
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A lot of it is an outcome of the company's imminent launch of its new operating system BB10, which has been receiving attention from network carriers.
Peter Misek of Jefferies & Co raised his rating on the shares to Hold from Underperform while the target price has been raised to $10 from $5 earlier.
On the other hand James Faucette of Pacific Crest maintained his Underperform rating on the stock and said that companies like Amazon.com, Inc.(NASDAQ:AMZN) and Google Inc(NASDAQ:GOOG) which not only offer their handsets at lower costs, but are also able to tie up with network providers to offer their services at cheaper rates, pose a substantial threat to the company.
Google's Nexus 4 smartphone was out of supply almost as soon as it hit the stores due to the pricing strategy adopted by Google and its network partners.
Can RIM compete with that?
Faucette analysed: If service subsidies become prevalent, it could hurt RIM’s service business. If declines in the service business were to accelerate, the key remaining bull case on the stock would be dramatically undermined. Let us be clear: we do not have a firm opinion on the quality of upcoming BB10 devices and OS (although we harbour our doubts). On the other hand, we are absolutely convinced that, regardless of its quality, the structure of the industry means that there is virtually no chance that BB10 will meaningfully change RIM’s trajectory.
Shares in RIM rose about 4 percent on Tuesday.