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Q1 Preview: Things Look Gloomy for Research In Motion (RIMM) Investors...

June 27, 2012 3:43 PM EDT Send to a Friend
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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: 34 | Down: 12 | New: 36
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Shares of Research In Motion (Nasdaq: RIMM) have fallen nearly 17 percent over the last five trading sessions as traders are positioning themselves ahead of the company's first-quarter 2013 earnings report, expected out on Thursday after the market closes. Shares hit a session low of $8.86 Wednesday morning, just pennies off the 52-week low of $8.83.

Analysts are expecting RIM to post a quarterly loss of 1 cent per share on sales of $3.11 billion. Research In Motion issued a gain of 22 cents per share last quarter and $1.33 per share for the same quarter last year.

Over the last six quarters, Research In Motion has topped Wall Street estimates by about 5 percent, on average. Check out our Ratings History page to get a quick-and-easy rundown of RIM's recent results.

Sell-side firms are decidedly bearish on the embattled company's stock. According to our Analyst Ratings page for RIM, just five firms rate the stock at Buy, 32 recommend a Hold, and 14 say sell the stock. Despite the negative sentiment, an average of analysts' price targets sit at almost $14.

Analyst Commentary:
  • Goldman Sachs - Believes sales will "keep missing expectations, but deep opex cuts may drive EPS up." The firm has seen RIM pricing aggressively to maintain its subscriber growth, and thus is modeling for lower average selling prices to push units higher. Goldman believes RIM will continue to make significant market share losses: from 10 percent of the smartphone market this year to just 3 percent in 2015.

    Maintains Neutral rating and $13 price target.

  • Wedbush - The firm's comments related to the quarter were predictably negative. Some of the more interest comments were related to specific business elements:

    • BlackBerry 10 devices will not help over the long term as iOS and Android will continue to steal share. Windows will also be emerging as a viable third in the space.

    • A split of the company into two units "would be a step in the right direction..." but the firm sees "minimal value" in the handset division.

    • A split could create a "decoupling of RIM's devices from the messaging platform..." and thus accelerate near-term losses of those all-important enterprise users.
    Maintains Neutral and $9.50 price target.

  • TD Newcrest - Said "although the warning on May 29th implied that the trough for RIM in front of the BlackBerry 10 product cycle is deeper than expected, we doubt weak financials in Q1 or Q2 will move the stock at this point." TD instead proposes these items to watch: 1. timing of BlackBery 10; 2. substantive updates from the strategic review; 3. any accelerating decline in the Services ARPU; and 4. any updates on the $1 billion cost reduction target, including specific headcount reductions.

    Maintains Hold and $12.50 target.

  • BGC Partners - Noted both internal and external challenges. Internal includes the "process of reducing headcount and changing senior management, with the ensuing chaos that results. This increases the chance of poor execution ahead of its critical product launch later this year." Externally, the firm pointed at the "highly competitive pricing dynamic, a situation that we see only getting worse as competitors use price as a lever to chase after market share."

    BGC said while it is tempting to want to call a bottom in the stock amid reports of liquidation, the firm said to consider the following:

    • Valuing patents can be tricky, because ultimately they are worth only the price a buyer is willing to pay.

    • Any potential strategic bidder for RIMM has probably already taken a look at the company; a strategic acquisition this year seems unlikely.

    • Transitions to new platforms are difficult and the cycle of downward revisions to revenue, phone volumes, and selling price may be poised to continue, not abate.
    Maintains Sell and $10 target.
Research In Motion normally reports quarterly results between 4:15pm and 4:30pm ET. Tune into our Earnings category ahead of then to get all the breaking news within seconds of the official release.




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