Hudson Square Upgrades Research in Motion to Buy

Research in Motion (NASDAQ: RIMM), designer and manufacturer of wireless solutions for the worldwide mobile communications market, was upgraded from Hold to Buy at Hudson Square Research on Monday.

As Benzinga reported on Monday morning, Hudson Square also established a $10 price target.

Hudson Square analyst Daniel Ernst wrote that, "Given 1) the essential role of mobile in the future of computing, 2) the increasing need for communications security 3) the existence of RIM's global, highly-secure mobile messaging network 4) RIM's extensive carrier relationships that extend to the billing level, 5) RIM's 78M high-margin paying subscriber base, and 6) a very digestible $1.6B enterprise value equating to roughly 2x EBITDA, we believe there exists a compelling case for a strategic sale of the company."

Ernst concluded by saying, "While we believe significant risks remain should the company elect to maintain independence and / or if the company is unable to secure a buyer near-term, our strategic analysis leads us, not without trepidation, to upgrade RIM from Hold to Buy."

As the Wall Street Journal reports, Hudson Square's stance is unusual because most other analysts are running from Research in Motion without looking back. Morgan Stanley even called the company, "essentially broken." Out of 47 research companies with ratings on Research in Motion, Hudson Square is the only one a Buy rating or equivalent.

For example, Friday saw Societe Generale downgrade Research in Motion to Sell from Hold. Analyst Andy Perkins said that, "The main problem was in handset sales, where units fell to 7.8m from 11.1m in the previous quarter and 13.2m a year ago. This weakness also impacted ASPs, which fell to $206 from $255 in the previous quarter. While this is partly product mix, we believe the aging handset portfolio is struggling to stay relevant. Overall, we fear that the hardware operations are now lossmaking for the first time in RIMs history."

Only time will tell if Hudson Square has been intuitive in going out on a limb, or naïve.

On Monday afternoon, Research in Motion traded at about $7.50, up roughly 1 percent.

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