National Bank Financial (NBF) is boosting its price target on Research In Motion Limited (NASDAQ:RIMM) (TSE:RIM), according to a new report released today. The reason for the boost is due to increasing BlackBerry shipments estimates to reflect the February launch of Blackberry 10.
NBF analysts believe that the new management team is executing by maintaining the BlackBerry subscriber base, managing costs and cash, and seemingly readying a February 2013 BB10 global platform launch. Most analysts were expecting a March launch.
Increasing shipments and F2014 estimates
NBF released their F2014 estimates for Research In Motion Limited (NASDAQ:RIMM) (TSE:RIM) just two months ago assuming a small batch of BB10 shipments in late February. They have increased their F2014 shipments to 35.5 mln units from 31.6 mln units reflecting 4.5% global market share (was 4.0%). The shipments boost reflects about one more month of BB10 product availability plus a little extra for the positive sentiment building in the industry from their discussions.
They expect momentum to continue
NBF reiterates their short-term investment thesis. Buy the stock ahead of the BB10 product launch when they expect shipment estimates to increase, especially from U.S. brokers where a break in negativity could lead to short covering and ongoing stock momentum. The carrier certification process is the key risk to their short-term thesis and shipments estimates.
Valuation still a moving target until sustainable business is proven
NBF analysts admit that applying a fundamental valuation to Research In Motion Limited (NASDAQ:RIMM) (TSE:RIM) is tough; and F2014 EPS estimates are very uncertain. But they note that if they even half-way correct with their $2.3 billion EBITDA forecast and management can stabilize the business on a recurring basis, then we’re off to the races with a current EV of just over $3 billion.
NBF boosts its price target from $12.00 (US ADR shares) to $15.00. ADR shares of Research In Motion Limited (NASDAQ:RIMM) (TSE:RIM) are currently trading at $11.52, surging 12% in early trading today. NBF's main reasons for lifting the price target include:
o Increased F2014 shipments to 35.5 mln units from 31.6 mln units reflecting 4.5% global market share (was 4.0%)
o The shipments boost reflects about one more month of BB10 product availability plus a little extra for the positive sentiment building in the industry from their discussions
o Increased BlackBerry smartphone ASP to $280 in May 2014 quarter (was $260)
o Increased inventory in February 2013 quarter ahead of BB10 launch
o Cash burn increases in F2013 to accommodate inventory build, which is recaptured in F2014 (ending cash balance unchanged at FYE 2014)
o Expect 9.2 mln unit shipments in Q1 F2014 (May) up from 7.6 mln units previously
o Gross margin declines due to lower-margin handsets bringing down total margin
o EPS increases but remains a very tough figure to model and is subject to major swings from potential headcount reductions or higher marketing spend, etc.