Analyst expects RIM to win, or get bought
Analyst expects RIM to win, or get bought
SHIRLEY WON
THE GLOBE AND MAIL
Published Thursday, May. 09 2013, 3:42 PM EDT
Thorsten Heins, CEO of Research in Motion, introduces the BlackBerry 10, Wednesday, Jan. 30, 2013 in New York. (Mark Lennihan/AP)
Inside the Market’s roundup of some of today’s key analyst actions.
Scotia Capital analyst Gus Papageorgiou expects first-quarter sales of Research In Motion Ltd.’s BlackBerry 10 smartphones to exceed Street expectations, and reach about 3.6-million units.
“If we are wrong in our estimates and RIM is unable to execute on the promise of BlackBerry 10, we believe a strategic partner such as IBM is highly likely to acquire the company,” he said in a research report released on Thursday.
Sales of the BlackBerry 10 can easily achieve the 3.6 million range because of the popularity of the recently launched Q10 keypad version, and wider distribution of the Z10 touch-screen device that went on the market earlier this year, he said. The analyst is expecting gross margins for the units to be around 50 per cent.
RIM may give an update on sales when it holds its annual BlackBerry Live event in Orlando beginning May 14. “The latest data point we have is that the Street was estimating approximately 3.1 million devices in the quarter at a much lower gross margin,” Mr. Papageorgiou said.
“The company launched the Q10 in May in the U.K. and Canada to great success. Many stores reported stock outs of the device. We believe the Q10 will usher in a strong upgrade cycle as exisiting die-hard keyboard fans will find the experience significantly improved over previous generation devices.”
If the company was able to sell 1-million Z10s last quarter, “we have no doubt the Q10 will sell significantly more than that,” Mr. Papageorgiou said. “We believe that Q10 is currently at 3 times the build rate of the Z10. Also, factor in that the Z10 had a full quarter of sales and distribution, particularly in the United States.”
RIM now trades at a “significant discount” to peers at about 3.5 times the next 12-months earnings, he said. “We note that the company maintains $2.9-billion in net cash, and we conservatively estimate BlackBerry’s patents are worth $2.5-billion. Together, these two assets represent 69 per cent of the market value of this company.”
Target: The analyst maintains his “outperform” rating with a one-year target of $22.35 a share. The average Street target is $13.28 a share.