RIM Upgrades Provide Some Relief for the Stock
Research in Motion (NASDAQ:RIMM) whose shares have fallen about 70% this year has received a boost from the brokerage community the past couple of weeks as several analysts have upgraded the stock, signaling that sentiment toward the smartphone maker may be on the turn. Sanford Bernstein upgraded the stock from Underperform to Market Perform [1] while GMP upgraded the stock to Neutral and Morgan Stanley (NYSE:MS) cut EPS estimated but reiterated its Sector Perform rating. [2]
While these aren’t exactly ringing endorsements, it seems as though analysts believe that any potential operating downside is largely priced into the stock. Trefis values the stock at $26, about 50% above the current price.
See Full Analysis for Research in Motion Here
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Market erosion
RIM has suffered as rivals such as Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) have eroded its share of its core Smartphone market. That makes up just over half of its share price valuation, according to Trefis estimates.
Sell-side analysts remain cautious about the company’s prospects, but note that at current valuations RIM may be worth a second look. The stock is trading below its book value of $18.92, according to Bloomberg. [3]
Value in subscriber base
Bernstein points to the company’s 70 million Blackberry subscribers as a source of value, providing stable service revenue of more than $4 billion annually. At current levels, RIM is valued at $120/subscriber which certainly seems low. [1] Third-quarter data released by Gartner recently also suggests a slight improvement in device sell-through, as RIM unit sales rose to 12.7 million from 12.65 million in the second quarter. That said the company’s share of worldwide smartphone sales by operating system fell to 11% from 15.4% in the same quarter of 2010. [4]
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Gartner Says Sales of Mobile Devices Grew 5.6 Percent in Third Quarter of 2011; Smartphone Sales Increased 42 Percent
- RIMM: Bernstein Ups To Hold; Mulling Take-Out Value, Tech Trader Daily, Barron’s Blogs [↩] [↩]
- Morgan Stanley Analysts Cut Research In Motion EPS Estimates, LocalizedUSA [↩]
- RIM as Wounded Puppy¹ Trails Book Value With Faith Fading, Bloomberg [↩]
- Gartner Says Sales of Mobile Devices Grew 5.6 Percent in Third Quarter of 2011; Smartphone Sales Increased 42 Percent, Gartner Newsroom [↩]