At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." Today, we'll show you whether those bigwigs actually know what they're talking about. To help, we've enlisted Motley Fool CAPS to track the long-term performance of Wall Street's best and worst.
Research in Motion -- it's just gotta be worth something, right?
This, in a nutshell, is the upshot of yesterday's Bernstein upgrade on Research In Motion
But is Bernstein right?
Let's go to the tape
Let's begin at the beginning: The analyst's record. Based on Bernstein's past history of successful stock picks in the communications equipment industry, yes, there's every reason to believe the analyst is right about RIM today. Over the four years we've been tracking Bernstein's performance, this analyst has developed a stellar record for 67% accuracy in comm-stocks-picking.
Bernstein's been right about JDS Uniphase
Bernstein's Picks Beating S&P by
So when Bernstein comes back today and tells us, yes, we were right about RIM being overvalued back in October of '09 ... but y'all are just crazy, selling it at today's prices, well, there may be something to that. The analyst certainly has the chops to back up its opinions.
Recent news reports would also seem to support the analyst's tempered pessimism. This week, for example, we began hearing rumors that Apple
So it would seem RIM isn't RIP just yet. That said, even Bernstein isn't urging investors to rush right back into the stock. Remember -- the analyst said it expects the stock to sell for perhaps $40 in a year's time, and that's a price $5 ahead of where the shares sit today. It's also worth pointing out that while optimistic about the stock, Bernstein still maintains extreme skepticism concerning the company's management: "We nevertheless believe management remains in denial. ... We therefore do not believe it is the right time to build a position to play a structural turnaround of the company."
In other words, all Bernstein's prepared to say in defense of RIM today is that the stock's become so cheap, there's little left to be gained by shorting it. Little reason to sell if you own it, too, because at this point, "things can't get worse in the foreseeable future."
And I find it hard to argue with that assessment. Whether you think of RIM as selling for eight times free cash flow, seven times GAAP earnings, or even 6.5 times forward earnings -- any way you look at it, the stock's shockingly cheap if RIM gets anywhere near hitting consensus growth forecasts of 13%. So while I doubt shareholders will cheer, exactly, to hear the news, Bernstein really is probably right about this one: So far down, and so long out, Research In Motion really does have nowhere to go but up.
Fool contributor Rich Smith does not own (nor is he short) shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 449 out of more than 170,000 members. The Motley Fool has a disclosure policy.
The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying Apple and creating a bull call spread position in Apple, as well as a short position in JDS Uniphase.
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