As we summarized here Wednesday, CNBC is conducting a March Madness-type bracket involving some of the top stocks on the market. With Apple Inc. (NASDAQ:AAPL) coming out on top against Bank of America Corp (NYSE:BAC) yesterday, the other semifinal matchup in this tournament was debated earlier Thursday, as Facebook Inc. (NASDAQ:FB) took on Research in Motion Ltd. (NASDAQ:BBRY) – also known as BlackBerry. Speaking about each of these stocks were analysts Tom Forte of Telsey Advisory Group and Daniel Ernst of Hudson Square.
Speaking of Facebook Inc. (NASDAQ:FB), Forte commented on CNBC that his firm has posted a $38 price target on the stock, which is nearly a 50 percent premium from its current price. “It’s all based on that mobile monetization” he said. “We’re expecting 31 percent of their ad revenue to come from mobile in the fourth quarter, versus 23 percent in the fourth quarter of 2012, so we’re hoping they have a good announcement today at 1 o’clock (Eastern).”
In regards to the announcement, which was believed to be Facebook Inc. (NASDAQ:FB) unveiling an Android-based Facebook smartphone, Forte said, “(A good announcement) would be anything that can get them more integrated into consumers’ mobile interactions is a good thing. I’m not sure that an HTC phone would be a needle-mover in its own right, but if you look at what Amazon is doing in its hardware with the Kindle, the Kindle Fire, and we think Amazon will eventually have a smartphone, it’s really about controlling your ecosystems and getting consumers to do more within your set of services on the Internet via mobile.”
While Ernst was asked to discuss Research in Motion Ltd. (NASDAQ:BBRY) – er, BlackBerry, he was not a huge proponent of the stock – at least in the long-term. “I say, vote Apple in the final on Monday,” he deadpanned. “For BlackBerry, I can’t recommend it. At 28 times earnings and significant business model risk, it’s far too risky.”
However, Ernst was more bullish in the short-term prospects for Research in Motion Ltd. (NASDAQ:BBRY) – if only a little. “In the short-term, there are a few tailwinds. One is, they’re rolling out several hundred carriers now, so just the channel-fill alone will significantly boost their top-line sales relative to what they’ve had. The second point is about two years ago, the average BlackBerry was about two years old; now it’s over four years old, so there is a big pent-up demand of likely upgraders. And the margins of these new phones is significantly higher, as the price of the Z10 is three times what the legacy model is. So they have some tailwinds at their back at the moment, but service revenue, which accounted for 100 percent of their profits in the last year, are going away. So the question is, can Black Berry as a low-volume producer, become a hardware-margin-only company?”
What are your thoughts? If you were buying a stock now for this year, would you chose Research in Motion Ltd. (NASDAQ:BBRY) or Facebook inc. (NASDAQ:FB)? Let us know your thoughts in the comments section below.
DISCLOSURE: I own no positions in any stock mentioned.