This Just In: Upgrades and Downgrades

But in "This Just In," we don't simply tell you what the analysts
said. We'll also show you whether they know what they're talking about.
To help, we've enlisted Motley Fool CAPS,
our tool for rating stocks and analysts alike. With CAPS, we'll be
tracking the long-term performance of Wall Street's best and brightest
-- and its worst and sorriest, too.

Somebody get them a Dramamine

Pity Citigroup. The Wall Street megabanker is binging on crow again today, reversing an earlier downgrade for the second time this week. Second-guessing its own November downgrade on Amazon.com on Monday, Citi admitted that now's the time to buy after all. Today, the analyst has come to a similar conclusion regarding Research In Motion (Nasdaq: RIMM).

As you may recall, Citi downgraded RIM to "hold" back in September
on fears that the smartphone maker's profit margins were withering
under the heat of increased competition from Apple (Nasdaq: AAPL) and Nokia (NYSE: NOK). If Citi was right then, you'd probably expect the stock to have fared even worse over ensuing months, as:

• Hewlett-Packard (NYSE: HPQ) and Dell (Nasdaq: DELL) announced their entry into the smartphone market.
• Garmin (Nasdaq: GRMN) moved forward with the "reverse-convergence" of GPS devices morphing into cell phones.
• A reinvigorated Palm (Nasdaq: PALM) progressed with plans to present the Pre.

Alas, if you had expected RIM to suffer, then just like Citi, you'd have been wrong.

Mmm, fresh crow!

As Citi now admits, far
from falling further, RIM's margins appear to have "stabilized in the
42%-44% range." Combined with "stellar top line growth," Citi now
expects the Canadian cell phone king to earn as much as $4.78 per share
in fiscal 2011. Applying an approximate multiple of 20 to this
projection, Citi comes up with a price target of $100 per share --
suggesting more than 40% upside to today's price.

"This call should be treated skeptically."

Four
days ago, a humbled Citi prefaced its Amazonian retraction with this
concession. After it made a wrong call in November, Citi fully expected
investors to look askance at its recommendation to buy Amazon in April.

Well, second verse, same as the first, folks. Citi didn't think to warn us to ignore its advice on RIM today -- but I will.

Citi's off the RIM

Is Research In Motion
doing better than expected? Yep. Is it likely to keep on growing and
thriving for years to come? Indubitably. Consumers and businesses alike
love the firm's "CrackBerries," and even a whole crop of shiny new
Apple iPhones haven't been able to take the glow off RIM's prospects.

Unfortunately, those prospects are fully represented in the stock price already.

In fact, I'd argue that RIM's stock now provides a case study in
"priced for perfection-ism." With only about $620 million in trailing
free cash flow  to its credit -- less than a third of what RIM reported
as net income for the last fiscal year -- the company isn't nearly as
profitable as it lets on. (At least, not on the cash flow statement, where it really counts.)

Foolish takeaway

By my own admittedly
conservative estimates, RIM stock should be trading for around $25
today. And while you may be skeptical of my number, with the stock now
trading around $70, I believe that RIM's price is more likely to move closer to my estimate than to Citi's.

Plus, I'm putting my (virtual) money where my mouth is. As soon as
this article posts, I'm going over to Motley Fool CAPS and rating
Research In Motion an underperformer. Feel free to tag along and watch how the stock performs.

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