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The Ratings Game

RIM shares drop as analysts cut outlook

NEW YORK (MarketWatch) -- Shares of Research In Motion Ltd. slid to their lowest level in more than eight years Friday after several analysts downgraded the stock and slashed their outlook for the company on the back of its disastrous fiscal first-quarter report.

In the last hour of trading, the stock was down more than 18% to $7.43. The shares have shed more than 47% since the first of the year.

After the close Thursday, RIM (RIMM) (RIM) reported revenue of $2.8 billion for the quarter ended June 2 and net loss of $518 million, or 99 cents a share. Adjusted for goodwill impairment, the company posted a loss of $192 million, or 37 cents a share. Analysts polled by Thomson Reuters were expecting a 1 cent a share on revenue of $3.1 billion.

The embattled company also said it was delaying the launch of its BlackBerry 10 mobile operating system and laying off 5,000 employees. Read what the company had to say about the BlackBerry here.

"RIM's prospects appear to be turning from bad to worse," wrote Tal Liani of Bank of America/Merrill Lynch, who downgraded the stock from a neutral rating to underperform.

"In our view, the risk of total value destruction over the next few years is possible as at this point we cannot see the light at the end of the tunnel," he added.

Two other brokers -- CIBC and Scotia -- also cut their ratings to sell. Several others lowered their price targets on the shares, as many analysts had already turned bearish on the stock in the last few months as the smartphone maker's competitive prospects have dimmed.

Ontario-based CIBC slashed its price target to $8 from $20, and lowered its rating to sector underperformer from sector outperformer.

"RIM's value is clearly murky assuming that they continue along the path of turning the company around," the analysts said in a note to clients. The firm said it expects the Canadian company to look into licensing its BlackBerry operating system to other manufacturers or sell some of its patents to generate extra cash in the near future.

Two other Canadian brokers -- National Bank and GMP Securities -- actually upgraded RIM to neutral, citing the fact that the stock's current price is well below the company's book value, so may see upside in the event of a sale or break-up.

Deutsche Bank lowered its price target to $8 from $13 and maintained its hold rating, noting that actual revenue was well below their estimate of $3.9 billion.

Raymond James and Associates, meanwhile, lowered its target to $9 from $12 and maintained its market perform outlook for the handset maker.

"We are perplexed why the urgency is not greater," said UBS analyst Amitabh Passi. "With business atrophying, RIM placing its future on BB10, and in an industry where quarterly delays can be devastating, RIM is back in the unfortunate position of another product void of [more than a year]."

Passi reduced her price target to $10.50 from $11.50 and maintained her neutral rating.