The are few stocks that are more contentious today than the Canadian smartphone and services company Research In Motion Ltd (NASDAQ:BBRY). In the last few months, investors have suggested everything from conspiracy theories, to bear raids, to pump and dump and short and distorts. But while average investors buy and sell shares and post comments on stock talk sites, analysts from various companies are playing the game as well with some volatile share price results.
Upgrades and downgrades
If one is looking for evidence that analyst opinions can swing share price they only need to look at the movement of Research In Motion Ltd (NASDAQ:BBRY) shares on June 18 and 19. On the 18th, RBC Dominion Securities painted an overall favorable picture of BlackBerry raising sales estimates and laying out the potential for a post-earnings squeeze. Shares rose strongly on the day from the $14.30s range to touch $15 before closing at $14.84.
But the next day, Research In Motion Ltd (NASDAQ:BBRY) shares reversed previous gains and then some as an analyst from Bernstein noted “waning” enthusiasm for BB10 devices. By midday, shares were already down well into the low $14 range.
Of course this analyst conflict should be nothing new for BlackBerry shareholders. Notes from Wells Fargo, Morgan Stanley, Jefferies, Cannaccord, Detwiler Fenton, Pacific Crest, Citi, and many others have caused the share price to swing, sometimes more than five percent, on the day of the report’s release. Some will question the credibility behind reports from lesser known analysts but, whether or not the reports have any truth, they certainly have shown their market moving ability.
Tuning out the noise
There will always be plenty of analysts trying to guess the next path a company will take, but with so many options out there, there is no way that every analyst can be correct. Those looking for past examples of analyst predictions in the smartphone space may remember the Apple Inc. (NASDAQ:AAPL) price targets. Analysts had practically set up a bidding war for who could place the highest price target on Apple stock. First $800, then $850, then $900. And the worst part? The media was ready to congratulate the first analyst to stick a quadruple digit price target on Apple.
But the job of an analyst is to do their best to predict where a stock will be next, not just to be the first one to attach a big number price target. Since then, the wave of analyst bullishness has become a wave of analyst bearishness, but only after the share price fell from the $700 range to the mid $400 range.
Despite Apple Inc. (NASDAQ:AAPL) and Research In Motion Ltd (NASDAQ:BBRY) being largely in the same industry, investors in both companies are aware of the massive size difference between the two tech companies. In Q2 2013 alone, Apple sold over 37 million iPhones and nearly 20 million iPads, numbers that dwarf BlackBerry’s whole year expectations. Trading at only around 10 times earnings, Apple Inc. (NASDAQ:AAPL) is not being given the same multiples as Google Inc (NASDAQ:GOOG) at 27 times earnings or BlackBerry, which investors are still waiting on to post positive full year earnings again. From a P/E perspective, Apple is not really overvalued, and a cult-like fan base should be there to buy the next iProduct whether it’s a new phone, watch, or TV. Some may ask if it’s possible to be bullish on both Apple and BlackBerry, and I believe the answer is yes. Research In Motion Ltd (NASDAQ:BBRY) only needs a small part of the smartphone market to be successful, and Apple Inc. (NASDAQ:AAPL) could easily make up for this small loss through growth in new markets and/or new products.
Some of the same analysts are likely covering both Apple and BlackBerry so just as Apple Inc. (NASDAQ:AAPL) estimates should have been taken with a grain of salt, so should Research In Motion Ltd (NASDAQ:BBRY) estimates, bullish or bearish.