Updated from 10:08 a.m. EDT

Research In Motion ( RIMM) won over many skeptics -- with at least five analysts upgrades Friday -- after delivering a strong February earnings performance and offering a cheery business outlook.

Shares of the Waterloo, Ontario-based BlackBerry maker continued to surge Friday, up as much as 28% over Thursday's closing price. RIM reported earnings after the bell Thursday with a solid beat-and-raise combination, soundly beating analysts' profit estimates and raising May quarter targets above the Street's consensus.

In homage to the smartphone shop, analysts from CIBC, Deutsche Bank, Credit Suisse, Cowen and BMO Captial all upped their ratings on the stock. Cowen, Credit Suisse and Deutsche Bank, three firms that had a sell rating on RIM, each upgraded the stock to neutral.

One of the few holdouts was JPMorgan, which stuck with a sell rating on long-range concerns about RIM's rising costs and falling phone prices.

RIM executives told analysts on a conference call Thursday evening that they expect May quarter earnings to be about 88 cents or 89 cents a share. And while that is down about a penny from the 90 cents in the prior quarter, which included the holiday buying season, it was well above the 83 cent profit analysts were looking for.

The company said sales for the May quarter will be flat sequentially, with the February quarter at about $3.4 billion. Yet that estimate is higher than the $3.35 billion analysts had expected.

RIM also said it expected to add about 3.8 million new subscribers in the current quarter ending in May. And gross margins are likely to widen to somewhere between 43% to 44% in the May quarter.

The positive view on gross margins soothed some of the immediate concerns hanging over the stock. RIM's gross margin, a measure of how well costs align with sales, had eroded to 40% from 50.7% in the span of six months. This drop triggered alarms that RIM was in a freefall as it shifted from its high-spending business-user focus to a broader, costlier consumer smartphone market.

On costs, RIM told analysts that operating expenses will increase 12% in the quarter as the company spends more on research and development and takes on more employees.

RIM fans assume the BlackBerry can continue to win market share. And barring a more severe economic downturn or a sharper drop in worldwide phone sales growth, RIM has a good shot of keeping revenue rising faster than costs.

But the competition is heating up. Apple ( AAPL) has a new iPhone coming, Palm ( PALM) has a hotly anticipated Pre phone arriving within weeks and Nokia ( NOK) has rekindled ties with AT&T ( T). To keep up with the pack, RIM will have to spend more on research and compete heavily on prices.

These bigger market forces will eventually bruise the BlackBerry shop, says JPMorgan's Gelblum.

However, those long-range concerns weren't weighing too heavily on RIM today. The stock was up $9.80, or 20%, to $58.89 in recent trading Friday.

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