research in motion CIBC estimates
Via CIBC Research

Research In Motion Limited (NASDAQ:RIMM) (TSE:RIM) shares have been on the rebound lately, and some expect that to continue this week as a crucial date approaches.  RIM is set to report FQ3 results on Thursday, December 20 after market close. As RIM has stopped providing guidance, the key metrics investors should be aware of are shipments, subscribers (if provided), service revenue and cash flow/burn.

CIBC analysts expect Q3 sales of $2.9B (consensus is $2.7B), shipments of 7MM (down 5% Q/Q, -50% Y/Y), service revenue of $1.05B, gross margins of 33.1% (consensus is  at 28.1%), and adjusted EPS of -$0.29 (consensus predicts -$0.36). They forecast break even cash flow. If Research In Motion Limited (NASDAQ:RIMM) (TSE:RIM) announces the figures, CIBC believes that they would  be higher than 80 million.

CIBC believes that their forecast of 7MM phones shipped (-5% Q/Q versus +22% Q/Q average last five years, down 50% Y/Y versus +56% average last five years) is a reasonable and conservative figure. They expect a portion of users will be holding off for BB10 phones, which are expected to hurt shipments slightly.

CIBC is sticking with their $17 price target (sector Outperformer- speculative). The $17 price target is based on 15x F2014E EPS of $0.85 plus cash per share of $4.47. Peers trade at 11.4x 2013E EPS estimates. for the Canadian based company. CIBC believes that if RIM can remain fairly steady in the U.S. (4% to 5% market share) and keep interest in key markets alive, multiple expansion will occur with expectations still far too low.  CIBC ends off by stating that investors should not wait, rather CIBC  believes that investors should buy shares now.

However, CIBC notes two big risks with their rating. A failure of BB10 to increase aggregate subscribers would pose a material problem for the company, brand and their price target. Additionally,  they assume that RIM prices BB10 phones for profitability (they estimate 20% GM for smartphones). At the same time, the analysts expect shipments to rise upon entry to the market. If this situation does not materialize, their thesis is at risk.