Some Nice Research on RIMM

 | Nov 16, 2011 | 11:34 AM EST
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It's so easy to bash Wall Street research. On any given day we can pull a recommendation out of a pile and say, "Look at this doofus, he reiterated his buy all the way down, and when we get to the bottom, what does he do? He upgrades it! What a moron." That's so standard as to be sickening.

We've seen it in all sorts of stocks, most recently in Nokia (NOK), where analysts loved it at $50, thought the world of it at $40, wanted to marry it at $30 couldn't wait to say it is the greatest thing since Stroehmann's bread at $20 and then just pull it at $5 after what turned out to be the last of a horrible multi-year skein of bad quarters.

So when we get a terrific piece of research, something that's against the grain and truly noteworthy, we have to flag it, and that's what I feel compelled to do with a very simple piece of research from Goldman Sachs today that says, "Action, Removed from America's Sell list, Research In Motion (RIMM). Upgrading to Neutral as sum of the parts supports stock's valuation."

Get this: On April 1, 2010, Goldman tech analysts Simona Jankowski and Amanda O'Brien put Research In Motion on the Conviction Sell list, predicting a series of shortfalls that have all come true. They described a rapidly declining earnings trajectory and predicted terrible operating margins. Right as rain. They nailed it: The competitive pressures from Apple (AAPL) and from Google's  (GOOG) Android would crush the BlackBerry. Could anyone have been more right? I don't think so.

The stock subsequently fell 71% while the S&P 500 rallied 6.8%.

Now, Jankowski and O'Brien are saying that there's enough intellectual property value and services cash flow streams that RIMM's stock isn't worth avoiding anymore, especially given the recent monetization of intellectual property portfolios like those of Motorola Mobility (MMI) and Nortel. There's also the possibility of stabilizing market share, although the Goldman analysts' estimates remain 9% below those of the Street for fiscal year 2013 and 23% below for fiscal year 2014. And Research In Motion has a decent $1.4 billion cash position, allowing the analysts to make a sum-of-the-parts judgment that says the company's valuation is consistent with its current market cap. In other words, no reason to own RIMM, but it is too late to sell it.

I've bashed enough Wall Street research in my time that when something this fantastic hits my desk, I have to call it out. Congratulations Ms. Jankowski and Ms. O'Brien. Job well done.

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