Putting on a RIM (RIMM) Trade Ahead of EPS
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Price: $14.64 +12.36%
Rating Summary:
0 Buy, 0 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 10 | Down: 17 | New: 16
Rating Summary:
0 Buy, 0 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 10 | Down: 17 | New: 16
Trade RIMM Now!
Analysts at MKM Partners believe Research In Motion (NASDAQ: RIMM) could trade higher on 3Q12 earnings, expected after the market close on Thursday.
While the firm remains long-term cautious on RIM, they see some short-term positives. Yesterday, shares traded up nearly 5 percent as the CEO presented at the Blackberry Jam conference. There the company said subscribers increased from 78 million to 80 million, which is well above the expectations of a 1 million sub drop. The Blackberry 10 demo was also more impressive than MKM analyst Michael Genovese was expecting.
Genovese sees a loss on the quarter of around $0.50, but forecasts FCF to be positive and net cash to increase from $2.24bn at the end of last quarter. The positive cash flow, along with increased subscriber numbers, should be more important near-term drivers for the shares, he said.
With downside risk reasonably well mitigated, the firm is recommending selling weekly 9/28 6 strike puts at $0.23 to finance the purchase of 7/7.5 calls for $0.16 and net $0.07 credit on the structure. "Over the past eight quarters, RIMM has had an average absolute move of 11.5% following earnings, and the weekly straddle is implying 15%," the firm notes. "This suggests that, if we're correct directionally, the stock could be above the 7.5 call strike at expiration Friday."
The firm is recommending selling weekly 9/28 expiration 6 strike puts to finance the purchase of 7/7.5 call spreads.
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While the firm remains long-term cautious on RIM, they see some short-term positives. Yesterday, shares traded up nearly 5 percent as the CEO presented at the Blackberry Jam conference. There the company said subscribers increased from 78 million to 80 million, which is well above the expectations of a 1 million sub drop. The Blackberry 10 demo was also more impressive than MKM analyst Michael Genovese was expecting.
Genovese sees a loss on the quarter of around $0.50, but forecasts FCF to be positive and net cash to increase from $2.24bn at the end of last quarter. The positive cash flow, along with increased subscriber numbers, should be more important near-term drivers for the shares, he said.
With downside risk reasonably well mitigated, the firm is recommending selling weekly 9/28 6 strike puts at $0.23 to finance the purchase of 7/7.5 calls for $0.16 and net $0.07 credit on the structure. "Over the past eight quarters, RIMM has had an average absolute move of 11.5% following earnings, and the weekly straddle is implying 15%," the firm notes. "This suggests that, if we're correct directionally, the stock could be above the 7.5 call strike at expiration Friday."
The firm is recommending selling weekly 9/28 expiration 6 strike puts to finance the purchase of 7/7.5 call spreads.
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