RIM office in Waterloo, Ont.Peter Power/The Globe and Mail
It keeps getting worse for Research In Motion Ltd.
On Monday, the shares fell another 6.7 per cent, after plunging 21.5 per cent on Friday, taking them to a fresh five-year low.
But as bad as the share price is, the sentiment on RIM is even worse. The latest downgrade comes from Sanford C. Bernstein analyst Pierre Ferragu, who lowered his recommendation on the stock to "underperform" from "market perform" and cut his price target in half - that's right, to just $20 (U.S.) from $40.
That ties (with Deutsche Bank) for the lowest target among the 40 analysts following the stock, according to Bloomberg, and underlines just how negative people have become on the stock.
"RIM is now on an accelerated decline trend that should take the company's earnings close to $4 (per share) this year and well below next year," Mr. Ferragu said in his report.
In its quarterly report released on Thursday, RIM shocked observers by slashing its 2012 outlook. It now expects to report full-year earnings ranging between $5.25 and $6 a share, down from $7.50 previously.
Mr. Ferragu reflects the skepticism surrounding the stock. He says earnings will fall to just $4.25 a share as RIM faces intense pricing pressures, sliding profit margins and rising costs as it struggles to compete against Apple Inc.'s iPhone and Android-based devices.
He isn't alone. RIM shares trade at less than five times estimated earnings, reflecting a widespread lack of confidence in the company's prospects.
Even corporate insiders are looking increasingly skittish. The Wall Street Journal reported on Monday that RIM's vice-president of digital marketing and media, Brian Wallace, has left for Samsung Telecommunications America. RIM's chief marketing officer departed in February.
Still, some observers see better days later in the year, after the company releases new products.
Chris Umiastowski, a blogger and former analyst, believes its third and fourth quarters will be crucial. "If RIM hits its massively reduced guidance, then the Street gets to see a trough and a rebound. Once we get past negative earnings momentum we shouldn't be looking at a 5 P/E."
David Berman