Research in Motion Ltd (Nasdaq: RIMM) is trading lower ahead of
the company's third quarter earnings report, expected out after the
market closes tomorrow, December 16. Shares are down2.2% to $59.14.
RIM is expected to report an EPS of $1.64 on revs of $5.39 billion.
The Waterloo, ON-based mobile manufacturer reported an EPS of $1.46
on revs of $4.62 billion, both beating the consensus calling for an
EPS of $1.38 and revenues of $4.47 billion. Last year, the Apple
rival reported earnings per share of $1.10 with revs of $3.9
billion, again edging out the Street consensus EPS of $1.04 and
revs of $3.78 billion.
Shares of the company gained 40% through the quarter, to $61.83 at
the end of November. Shares are down 1.8% since the end of the
quarter, and nearly 8% lower on the year.
A simple valuation puts RIM trading for a forward P/E of 9.6c FY12
EPS estimates, compared to 14.5x for Apple (Nasdaq: AAPL), 10.1x at
Microsoft (Nasdaq: MSFT), and 11.3x for Nokia (
Data from Bloomberg has 26 analysts with a Buy on RIMM, 21 with a
hold, and 10 suggesting to Sell. The analyst price target average
is $68, with a high of $92 and low of $40.
Analysts Through the Quarter
In September, JMP Securities initiated coverage with a Market
Goldman cut their price target from $50 to $45, maintaining a Sell
rating. In November, Goldman
picked the price target
back up to $50, noting stronger sales of PlayBooks.
BGC Partners initiated at Sell, with a $38 price target.
In October, Jeffries started the shares at Hold, and $55 price
target. They noted later that channel checks pointed to stronger
sales trends, and that RIM is one of the
tech names listed.
Late October saw a downgrade from Oppenheimer from Outperform to
Perform, suspending their $58 price target on the shares.
from Buy to Hold in November, with a price target lowered from $65
Bloomie put out an interesting piece saying that the Torch
smartphone will actually
to their top and bottom lines. They note that they device shipped
to dozens of carriers in August, and saw a half-price promotion in
November from AT&T (
). Bloomberg notes that RIM has lost about 400 basis points of
market share over the last year (of which they cite IDC for the
data). Shipments in the quarter are expected to be 14.1 million
BlackBerry devices, about the middle of their own guidance. The
number would be in-line with what Apple says that they shipped in
their quarter. Although RIM said that they will not report net
subscriber adds this quarter, analysts are looking for 5.1 million
net adds with an average selling price of $311, both at the low-end
of the company's own forecast.
One fear highlighted is competition in their key business segment,
as corporations loosen regulations of what sort of devices will now
be able to store and transmit sensitive company data. Additionally,
Microsoft's recent foray back into the mobile market with solid
offerings could impact RIMs results (though Microsoft hasn't
released any numbers about their new phones following the first
month that they've been available).
Goldman Sachs recently increased their outlook for the quarter
based on a smartphone survey and retail checks. Goldman is looking
for an EPS of $1.62 and sales of $5.33 billion. They think that the
Street isn't properly "modeling the ASP and margin declines in the
smartphone market overall and for RIM in particular." They are
modeling for a 12% decline in ASPs in FY12, compared to the
Street's outlook for a more modest 6% decline. Reasons for the more
somber outlook include: (1) the shift in RIM's business from mature
to emerging markets, (2) rapidly increasing competition, and (3)
much faster growth in the low end than the high end of the
Goldman maintains their Sell rating, and $57 price target.
Wedbush thinks Q311 results will be slightly better than expected.
They are looking for a non-GAAP EPS of $1.69 and revs of $5.5
billion. The note that enterprise stickiness concerns, erosion in
enterprise messaging, margins, and market share losses will be
offset by international growth, new phones, the PlayBook, and stock
buyback. Wedbush sees net sub adds of 5.3 million, at the
higher-end of RIM's outlook for 5 - 5.4 million adds, and an ASP of
$310. They expect Q411 guidance to be above the consensus.
Wedbush has a Neutral rating on the shares, and a price target of
Kaufman Bros. thinks that numbers should be "decent" on
international sales and good, but not great, Torch sales. They
expect positive guidance, as the company tends to give. Kaufman is
looking for net adds of 5.2 million and an ASP of $310.
International sales, which account for 52% of their total revs,
will be driven by text-based applications. U.S. business revs will
be mixed with a transition to BlackBerry 6 offset by increased
competition. Kaufman notes that this will be the last quarter that
ASP and net sub addition data will be available.
Kaufman maintains a Hold and $60 price target.
Hapoalim Securities also believes that the Street is
underestimating the growth in smartphones, and RIMs ability to
hold/gain market share. HPS also is expecting margins to stay firm
longer than expected, which means that the Street will be
increasing their estimates over the next 12-months. Their checks
indicate that Torch momentum began to fade through the quarter, but
should provide a nice sequential boost. Retail space checks show an
increase for RIM, while discounts have become more aggressive
causing prices to drop about 9%. List prices, on the other hand,
increased 3%, pointing to a richer mix on shelves. Hapoalim is
looking for an EPS of $1.69 on revs of $5.357 billion.
Hapoalim is keeping a Buy on the shares.
Research in Motion is expected to release their Q311 earnings on
Thursday, December 16, 2010, at approximately 4:00pm EST. Stay
tuned to StreetInsider.com's
section to see our analysis of the highly-anticipated quarterly
results within seconds of their release.