Why Is Wall Street Suddenly In Love With Challenged BlackBerry Maker RIM?

Over the last week, Wall Street analysts have not once, but twice upgraded Research In Motion’s stock projections in the belief that its new BlackBerry 10 smartphones will not be a total flop. 

Does Wall Street know something about BlackBerry maker Research in Motion that we do not?

Last week, National Bank analyst Kris Thompson increased his stock target for RIM from $12 to $15, saying that the new BlackBerry 10 mobile operating system had a 20% to 30% chance of succeeding. On Thursday, Goldman Sachs analyst Simona Jankowski increased her 12-month price target projection for RIM to $16 from $9. Jankowski also gave BlackBerry 10 a 30% chance of succeeding. RIM’s stock was up to $11.59 (plus 6.02%) as of 3:38pm Eastern Time EST. The stock hit a high of $12.18 a share at its peak earlier in the day. 

The surprising aspect of these analyst predictions is that they have nothing to do with any financial tomfoolery. We often see stock prices rise or fall based on different accounting practices, write downs, changes in gross margins or other financial practices that take a master’s degree in finance to understand. Both these analysts seem to be basing their projections on BlackBerry 10 actually performing well in the market. 

The projections appear to be based on reported wireless carrier interest in BlackBerry 10 devices. The carriers are supposedly very interested in RIM’s new smartphones, to be announced on January 30, 2013, as a strong Number 3 contender against the iPhone/Android smartphone duopoly. RIM reportedly had 50 global carriers doing lab tests on BlackBerry 10 devices as of the end of October. (As an adide, carrier interest in a strong No. 3 smartphone option from RIM does not bode well for how the carriers think of Windows Phone 8 from Microsoft).

Something, Anything!

Fact is, RIM could release basically anything of any quality at this point, as long as it is new, and the stock price would jump. It has been more than a year since RIM last released a flagship product (if BlackBerry 7, announced in August 2011, counts as a flagship product) and BlackBerry 10 is an entirely new operating system that will not be backwards compatible to RIM's older devices. 

It is not like the analysts are not overflowing with goodwill for RIM. Both give RIM only up to a 30% chance of success with BlackBerry 10, meaning they are 70% confident that the new operating system and smartphones will fail. Only in baseball is a 30% average considered successful.

No BlackBerry 10 Devices Yet

As of yet, we have not seen a complete BlackBerry 10 device from RIM. The company has given out BlackBerry 10 “Alpha” devices to developers at its various “BlackBerry Jam” events this year in Orlando, San Francisco and currently in Asia. RIM is expected to announce at least two BlackBerry 10 devices (one with and one without a physical keyboard) in January that will be shipped by sometime in the spring quarter.

From the little we have seen of BlackBerry 10 at RIM events this year, though, there is at least some hope for the operating system and, hence, RIM’s future. Considering how long BlackBerry 10 has been delayed, though, RIM needs to ship a fully baked and refined product from the starting gun if it has any hopes of gaining continuing to compete with iOS, Android and Windows Phone. Considering how many times RIM has stumbled in the last three years, that is far from a sure thing.

But if we were to take a guess at BlackBerry 10's odds of success, something like 1 in 3 sounds about right. Maybe RIM will end up surprising us with what it will announce in January.