Goldman Upgrades RIM (RIMM) to Buy; Upcoming BB10 Launch Improves Risk/Reward

November 29, 2012 6:51 AM EST
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Price: $14.64 +12.36%

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Research In Motion (Nasdaq: RIMM) shares are on the rise Thursday morning following an upgrade by Goldman Sachs from Neutral to Buy, with its price target increased from $9 to $16, implying 44 percent of upside.

RIM's BB10 launch should be a strong one, according to Goldman, with the risk/reward becoming more favorable. The firm cites three key points on its estimate adjustments: "(1) the ASP lift from BB10; (2) the associated margin improvement; and (3) the channel inventory fill for BB10."

Goldman expects RIM's quarterly results to exceed expectations over the next four quarters. The firm commented, "we now estimate that RIM will turn profitable in FY14 (Feb) vs. the consensus view of continued losses. The primary source of upside is our FY14 smartphone ASP estimate of $270, up 21% yoy vs. the consensus view of roughly flat, as we expect BB10 devices priced at over $400 will drive more than a third of the total volume, offsetting sharp declines in emerging markets where ASPs are much

Goldman is also raising EPS estimates:
  • FY13 from a loss of $1.07 to a loss of 99 cents;
  • FY14 from a loss of 52 cents to profit of 20 cents per share; and
  • FY15 from a loss of $1.61 to a loss of 62 cents per share.

Ahead of the bell, RIM shares are up about 8.7 percent.

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