Jefferies Likes RIMM, So It's Time to Sell

 | Nov 21, 2012 | 7:00 AM EST
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One of the biggest sell-side critics of Research In Motion (RIMM) has been Jefferies analyst Peter Misek.

For the past six months, no one has pounded the table as strongly in favor of selling RIMM as Peter. He has had a $5 target on the stock.

When there was a glimmer of good news for the stock, such as BB10 phones being accepted into carrier labs for testing a couple of weeks ago, Misek was resolute in his conviction that you should sell the news.

Yet the stock is up 25% in the last month.

Following this ramp up in the stock price, and with a specific target date for a BB10 launch at the end of January, Misek now says the stock is worth $10 and says you should hold it instead of viewing it as a "sell."

The main source of his optimism is informal polling of carriers. They tell him that they want a third alternative to Apple's (AAPL) iPhone and Google's (GOOG) Android.

Therefore, they're looking forward to the new BB10 phones. You sense that these carriers believe RIMM might be a better third alternative than Nokia (NOK) or  Microsoft's (MSFT) Windows Phone.

Misek says there's a 20%-30% chance that BB10 will be a hit and that RIMM's stock will climb to $43 in 12 months. He says there's a 20% chance that BB10 is a bust and that RIMM can orchestrate a sale for the company for $5 to $7 a share. Finally, he sees a 60% chance that BB10 goes nowhere and that the company can't sell itself, and the stock will go to zero.

My sense is that if you own RIMM and have participated in this rally, you should be selling Misek's upgrade. I believe that the chances of BB10 doing better than expected are higher than he does. However, I believe the stock has come a long way in a month and that we will now be in a holding pattern for the stock until the devices actually start selling in three months. Between now and then, we've got a December earnings report, which might surprise on the downside.

Therefore, you should continue to watch RIMM as a spec stock over the next year, but the run-up has probably run its course for the next two months.

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