Research in Motion (NASDAQ:
RIMM) is getting some interesting commentary this morning:
- Baird is upgrading RIMM to Outperform from Neutral with a $84 price target saying they would be buyers on recent weakness. RIMM has declined almost 20% since reporting Q2 on September 24, presenting what they view as an attractive entry point.
Strong forecast growth. Baird forecasts revenue to grow 34.9% this year and 19.7% in 2011, with EPS growing 22.0% and 17.9% over the same periods. - Smartphone market expanding. In calendar Q2, global smartphone shipments grew 26.9% YOY, with Apple and RIM both taking share YOY (according to Gartner).
- Upcoming device launches positive. They believe upcoming device launches in front of the holiday season, including Storm 2, could provide a positive catalyst.
- iPhone headline risks in the stock? With Apple recently announcing plans to offer the iPhone through three carriers in the U.K. and Canada, they believe at least some of the Verizon/iPhone headline risks are likely in the stock.
- Valuation compelling. RIMM is currently trading at 13.9x Baird's fiscal 2011 EPS forecast, vs. our big-cap tech index at 16-17x and the S&P 500 at 14.8x. Their $84 target price is based on 17.0x their 2011 fiscal EPS estimate of $4.95.
- RBC Capital highlights 10 reasons why they remains bullish on Research in Motion (RIMM):
#1-3) Competitive Advantages Intact. BlackBerry's 'crackberry' messaging, other advantages (e.g. battery life) remain unmatched. Strong Q3 unit guidance (37-48% Y/Y) affirms RIM remains relevant with consumers, carriers. RBC expects RIM to narrow competitive gaps in Browsing, Apps, UI (User Interface), next 6-12 mos. Despite intensifying competition, they foresee a shakeout, with RIM retaining global leadership.
#4) Don't Fear Moderating ASPs. Recent ASP mix-shift is not from competitive pressures, but self-inflicted, positioning RIM to better penetrate the mainstream Smartphone opportunity. Moderating ASPs are part of firm's long-term thesis on the Smartphone market (they expect ASPs to decline at est 8-10% annually to $273 end F12), but unit momentum and market penetration for RIM increases. GM's meanwhile are expected to remain healthy at 40-41%.
