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Research In Motion: BB10 Upgrade Should Move Shares Higher

 November 26, 2012 02:56 PM

(By Mani) Shares of Research In Motion Limited (NASDAQ: RIMM) (TSE:RIM) should trade higher as BlackBerry 10 (BB10) devices are looking good. Details of BB10 are being leaked by carriers and developers alike while the early feedback has been generally positive.

The features include true multi-tasking with messaging and apps, one thumb navigation, swipe to type keyboard, improved speedy browser.

In addition, a competitive hardware and 100,000 BB10 applications available on launch day are all encouraging to the "Productivity" and "Flow" vision RIM is looking to promote itself as and this should re-ignite Blackberry fan support. 

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"We believe the early reviews of BB10 devices are strong enough to keep and grow the current subscriber base. It is also our view that the recent increase in share price still does not value an increase in RIM shipments or subscribers. We believe investors should buy the shares at these levels, prior to the BB10 launch," CIBC analyst Todd Coupland wrote in a note to clients.

BB10 helping RIM win material share back from Android and iOS remains an open question. Regardless of market share upside, RIM is now in a good position to stabilize its base successfully, which will help repair its brand reputation and push shipments higher on a year-over-year basis off a low base.

"The expanding Global smartphone market will also help and these factors we believe will lead to positive EPS in F2013," Coupland noted.

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RIM's new BlackBerry 10 phone is scheduled to go on sale in February and should reach about 35.5 million in shipments next fiscal year, up from a previous estimate of 31.6 million, said National Bank analyst Kris Thompson as quoted in a report by Bloomberg.

BB10 will be launched globally to some pent-up demand with the Blackberry fan base Recall that when Torch was launched at AT&T, Inc. (NYSE:T), it added 2 million units.

Meanwhile, services revenue are expected to decline by 6 percent. Thus far, services revenue has not declined, but it is prudent to build in deterioration given certain BB10 functions won't require a BlackBerry Enterprise Server (BES) or BlackBerry Internet Service (BIS).

It is also a stated plan of action that RIM will use price of both its hardware and services to maintain and grow subscribers in International markets where BBM has a strong foothold, such as Indonesia and much of Latin America, the Middle East and Africa.

"When implemented, both factors will help subscriber numbers, but will be offset up lower monthly ARPUs," the analyst said.

Recently, shares of RIM soared after upbeat comments by National Bank. National Bank analyst Kris Thompson believes that there is more money to be made in the stock ahead of the early 2013 launch of the make-or-break new line of devices, according to a report from Reuters.

RIM could trade at higher P/Es as it transitions from red to black or negative EPS to positive. Getting a precise P/E currently is very difficult, and during this type of transition, it is likely to reflect and be valued assuming a high EPS growth rate. Shares of RIM are trading at

"Our target price is $17 and implies a forward P/E of 15x plus cash of $4.47/share. Our view is that at least 15x should be used, and frankly it could be a lot higher if BB10 were to gain material traction," Coupland added.



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