Analysts at Macquarie Equities Research projected that the stock price of Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) could jump if the company shows a surprising upside on ASP and gross margins on its earnings report for the first quarter of its fiscal 2014 this coming June 28. The analysts remain cautious on the stock over the long-term.
Based on the Asian channel checks conducted by Macquarie analysts Kevin Smithen and Zach Horat, the build rates for the Canadian smartphone manufacturer remain strong. According to the analyst, Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) sell-in worldwide might be “slightly better than many fear.”
“Good for Enterprise” Survey
The analysts also showed the result of Macquarie’s internal survey on staff’s willingness and preference to use “Good for Enterprise” as an alternative for existing mobile technology such as BlackBerry. Data showed that 46 percent of the respondents are willing to give up their BlackBerry and just use their personal devices with the Good for Enterprise application.
Smithen and Horat added that their conversations with several mobility procurement personnel in some large corporations who are evaluating an upgrade to BB10 devices share a bearish position similar to the result in their internal survey.
BBRY’s Shipment Estimates Reduced Dramatically
The analysts reduced their estimates for BB7 shipments for F1Q14 from 4.6 million to 3.6 million and maintained their shipment estimate for the BB10 at 4.26 million. According to them, the total 8 million shipment estimate for the smartphones of Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) represents a 37 percent sequential increase, and 2.3 percent increase year over year.
Smithen and Horat also believe that fiscal 2014 is the peak for Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB)’s EPS citing the decline of the company’s hardware and services revenue. The analysts project that their initial estimate for BB10 gross margin at 30 percent would decline to 20 percent by the end of 2015. According to them, their estimate is aggressive, and if its gross margins declines faster than their expectation, the Canadian smartphone maker could be unprofitable in 2015.
In addition, the analysts wrote, “Ultimately, we are skeptical that BlackBerry can penetrate the consumer market, and its remaining Enterprise installed base is no longer large enough to drive unit sales beyond the first two quarters. Nevertheless, we would be careful with short positions into the print. In the near-term, before the business seriously erodes, there is tremendous operating leverage in BBRY’s model, and better than expected initial sell-in could drive the stock significantly higher.”
The analysts raised their EPS estimate for F1Q14 EPS estimate for Research In Motion Ltd (NASDAQ:BBRY) (TSE:BB) from -$0.01 to $0.09 and their full year estimate from $0.20 to $0.30 on higher margins expectation.
