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RIM enjoys post-Super Bowl rally amid analyst upgrade

A man holds the new touchscreen BlackBerry Z10 smartphone, during a launch event for the new phone in London, on Jan. 30, 2013.

Lefteris Pitarakis/AP

Inside the Market's roundup of some of today's key analyst actions

Call it the Super Bowl bounce. Shares in Research In Motion Ltd. rose more than 15 per cent Monday, one day after its first-ever ad targeted at the NFL championship aired in splashy fashion in the United States.

More likely, though, today's rally has more to do bargain hunting after last week's 27 per cent plunge – and an upgrade from analysts at Sanford C. Bernstein. The research house boosted its rating to "outperform" from "market perform" and raised its price target all the way from $12 to $22.

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RIM shares, which today for the first time trade under the tickers BB in Toronto and BBRY in the U.S., have been unusually sensitive to analyst views over the last few months. And those opinions have been all over the map, with no consensus emerging on the Street as to whether RIM's BlackBerry 10 phones will turn the company into a champion again – or mark the beginning of its end.

Bernstein said investors should use last week's pullback, which accelerated right after the BlackBerry 10 devices were unveiled, as a buying opportunity. And indeed many are.

"BlackBerry presented its new platform last week, which triggered a pronounced pull-back for the stock. At the same time we have grown more confident in the likely success of the BlackBerry 10 launch, supported by low channel inventories, strong operator support and material pent up demand. Initial feedback we have received from distributors on the first days of sales is particularly positive," the Wall Street Journal quoted Bernstein analysts as saying. "We remain skeptical of BlackBerry's ability to orchestrate a sustainable comeback, but we believe that a successful launch will increase the option value of credible positive outcomes like a stabilized niche positioning, the development of new business models, strategic partnerships or even an acquisition."

RIM's Super Bowl ad, part of a major new rebranding and marketing push, features a man using the BlackBerry Z10 setting himself on fire and performing other magical-like acts. But the spot, according to the Wall Street Journal, wasn't considered one of the better ads from last night. Ad executives criticized it for focusing on things it can't do, instead of what it can. RIM expects to roll out other ads in coming weeks that will focus more on product features.

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RBC Dominion Securities analyst Drew McReynolds upgraded Cogeco Cable Inc. to "outperform" from "sector perform." He's encouraged by an improving outlook for the company's free cash flow, which has significantly reduced the likelihood of an equity issue that would dilute shareholder value.

He also notes the company trades at a "deep" discount to peers based on its forward enterprise value to EBITDA valuation, which "adequately reflects the execution risk associated with the company's international expansion."

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Upside: Mr. McReynolds raised his price target by $5 to $47.

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Imperial Oil Ltd.'s cash flow in the fourth quarter of $1.6-billion were well above consensus estimates thanks to strong refining margins and lower cash taxes, noted Raymond James analyst Justin Bouchard. But this was overshadowed by a $2-billion cost overrun on the 110,000-barrel-per-day Kearl initial development project.

"In addition, it sounds as if the ramp-up of the project is going more slowly than anticipated," he said.

Upside: Mr. Bouchard trimmed his price target by $1 to $49 and maintained an "outperform" rating.

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Given its low grade, the economics of Osisko Mining Corp.'s Hammond Reef project in northwestern Ontairo will only be favourable if gold prices are above $1,600 (U.S.) an ounce, said Canaccord Genuity analyst Steven Butler. "We believe management remains non-committal to its development," Mr. Butler said as he lowered his net asset value for the project.

Upside: Mr. Butler cut his price target to $8.70 from $9 while reiterating a "hold" rating.

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Canaccord Genuity upgraded Perrigo Co., a manufacturer of over-the-counter and prescription pharmaceuticals, to "buy" from "hold." Analyst Randall Stanicky believes underlying consumer strength is more robust than most believe, with the company seeing robust sales in early 2013 from the cough and cold season. Meanwhile, the stock is at its lowest valuation level since late 2010, and he thinks the Street's generally negative sentiment towards the company may end up working in its favour.

Upside: Mr. Stanicky raised his price target to $128 (U.S.).

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About the Author
Investment Editor

Darcy Keith is The Globe and Mail's Investment Editor. He has been a business journalist since 1992 and joined the Report on Business in 2010 from Yahoo! Canada, where he was the senior editor of finance. More

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