Shares of Research in Motion (RIMM) are up 60 cents, or almost 4%, at $16.60 this morning after Scotia Capital and Sterne Agee took opposing positions on the stock.
Sterne Agee’s Shaw Wu cut his rating on the shares to Neutral from Buy, and suspended his $31 price target, arguing Street estimates are likely not to be met given heightened competition.
But Scotia Capital’s Gus Papageorgiou this morning reiterates a Sector Perform rating, calling the stock “absurdly oversold.”
Wu first cut estimates back on October 13th, after hearing that BlackBerry models other than “Bold 9900″ that have been recently introduced are not faring so well. He now says he should have cut his rating on the stock then, when it was at $24.
Wu now sees HTC (2498), Amazon.com (AMZN), Samsung Electronics (SSNLF), and Apple (AAPL) all put pressure on prices that RIM will have to match. He also thinks the network outages the company and its clients suffered in October will result in concessions on services pricing.
Hence, Wu cut his estimates again. He’s sticking with his estimate for the fiscal Q3 ending this month, $5.1 billion in revenue and $1.19 per share, slightly below consensus. But for the full year, he’s modeling $19.6 billion and $4.54 per share, down from $19.7 billion and $4.75, and for next year he sees $20.9 billion and $4 per share, down from a prior $21.1 billion and $5 per share.
Wu still sees takeout value in the stock, and estimates the company’s patent holdings are worth $2.5 billion to $4 billoin.
Papageorgiou, on the other hand, writes that RIM shares are cheap anyway you look at them. The stock fetches just 1.2 times tangible book value of $13.20. And book value is higher if you add in $1.48 for the patents recently acquired from Nortel.
Then, too, the company “generates over US$1.0B per quarter in high margin service revenue and has gained share in many parts of the world such as South-East Asia. Latin America and Western Europe despite a highly uncompetitive portfolio,” writes Papageorgiou.
Also, Papageorgiou has a much higher estimate for Q3 than the Street, at $6.4 billion in revenue while consensus is at $5.31 billon. That’s because the company’s been draining inventory even as it kept shipping new units, and adding customers, setting up for a surge in shipments, he thinks:
If sub-add levels remain at 5.0M, and�upgrade cycles at 16 months at some point RIM will likely move to get channel inventories back to healthier levels. Moving from depleting the channel to adding to the channel gives you a double whammy in terms of volumes. The only way our numbers become unattainable is if demand falls off a cliff. But there is no evidence of that.
Update: Morgan Keegan’s Tavis McCourt today offered his own positive take on RIM, whose shares he continues to rate market perform:
Reuters ran a great article [on November 25th] on RIM�s 9790 launch in Indonesia, where a number of people were injured during a promotion in Jakarta where over 5,000 lined up for a chance at a 50% Blackberry. Various articles quoted RIM execs as indicating Indonesia now has over 3 million Blackberry subs, and the company will ship 4 million Blackberries into the country this year. Although RIM�s overall emerging market growth has slowed in the past 2 quarters, it appears the brand is alive and well in Indonesia. Back in the US, RIM started a promotion giving away free Playbooks for enterprises that upgraded to BES 5.0
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