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Research In Motion (RIMM) Raised To 'Sector Outperformer - Speculative' By CIBC

 November 26, 2012 10:03 AM

(By Balachander) Research In Motion Ltd. (NASDAQ: RIMM) (TSE:RIM) shares were upgraded to "Sector Outperformer - Speculative" from "Sector Underperformer" by CIBC World Markets Inc.

The brokerage also more than doubled its price target on the stock to US$17.00 from US$8.00.

"Our rating change is based on RIM's existing subscribers wanting to upgrade to BB10. RIM's 80MM subscribers including enterprise (20MM) and the largely no-contract Int'l consumer base should both upgrade," the brokerage wrote in a note.

The brokerage estimates 41.4MM shipments in F2014 vs. 30.2MM in F2013 and 49MM in F2012.

CIBC said RIM should continue to move higher as sentiment, BB10 marketing and lack of new competing devices play out.

[Related -Google (GOOG) Gives A Lesson On The Importance Of Viewing Multiple Timeframes]

With a January 30 BB10 launch date locked in, along with carrier and developer feedback now more clear, an upgrade of the existing subscriber base will be the most likely outcome. Even in the face of lower services ARPU (we assume -6% in F2014), RIM looks materially undervalued.

At the same time, RIM has stated it expects to see declines in services revenue due to pricing pressure. CIBC sees a 10 percent decrease in services ARPU y/y, coupled with 20 percent GM on devices in F2014, leading to EPS of $0.85.

The stock, which has been trading in the 52-week range of $6.22 to $18.77, added 1.33 percent to trade at $11.81 on the NASDAQ on Monday.



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