AmTech on Research In Motion: Use Weakness to Buy Best Growth Story in Large-Cap Tech (RIMM)

June 26, 2008 11:34 AM EDT

American Technology Research reiterates its Buy rating and $205 price target on Research In Motion (Nasdaq: RIMM) following yesterday's disappointing Q1 earnings. The firm called RIMM a "must own stock for growth managers."

The AmTech note is extremely bullish; the firm said "Investors hoping for a pull-back should not wait long; this may be the best chance left this year to BUY weakness in the best growth story in large-cap tech." Despite today's market reaction to the earnings, AmTech believes Research In Motion's fundamentals remain very strong: two key metrics -- revenue and subscriber growth -- were above expectations.

AmTech calls Research In Motion's management historically "very frugal", likely referring to its announced increase in R&D, saying "there have been a few heavy investment periods in the past and they have all paid back handsomely." The firm believes investors will see benefits from a "big 2H ramp of new products".

As Research In Motion seems to be focusing on higher volume sales at lower margins, AmTech's forecast revisions seems in-line with this assumption. The firm said it raised its "handset unit forecast significantly, but still see room for upward revisions as we get clarity on unannounced products and carrier promotions." At the same time, the firm is " now forecasting the operating margin 310bps lower than our previous forecast for the out-year." As a result, AmTech lowered its FY10 EPS estimate on Research In Motion from $6.80 to $6.60, compared to the Street consensus of $5.40.

Research In Motion Limited engages in the design, manufacture, and marketing of wireless solutions for the mobile communications market worldwide.

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