RIM woes in spotlight despite robust results
TORONTO (Reuters) - Analysts mostly cut share price targets for BlackBerry maker Research In Motion on Friday, focusing on tough competition and a weak U.S. performance rather than RIM's robust results.
RIM's earnings per share, revenue and shipments all exceeded market forecasts, and the firm's predictions for the current quarter also surprised on the upside.
But while a few analysts upgraded stock targets on an expanding market for the new BlackBerry Torch, most zoomed in on problems that include RIM's stagnant position in the congested U.S. smartphone market, where it competes against Apple's iPhone and a slew of devices running Google's Android operating system.
"The international growth, particularly in emerging markets and some of the prepaying markets is doing exceptionally well and it is masking this weakness we're seeing in North America," said Jeffrey Fidacaro from Susquehanna Financial, which downgraded RIM to "negative" before the results and has a price target of $37.50, one of the lowest in a scattered market.
RIM conceded that the launch of competing devices early in the quarter had hurt results, but it said the U.S. launch of the Torch in mid-August helped overall shipment numbers.
The Torch, a touchscreen device with a slideout keypad that runs a revamped operating system, launched in the United States two weeks before the end of the quarter with AT&T. It will roll out to 75 other carriers worldwide this quarter.
RIM's Nasdaq-listed shares were 1.6 percent higher by noon at $47.24, roughly 8.5 times forward earnings expectations. That price was well down from Thursday's post-market levels.
RIM stock is down 43 percent since this time last year, while shares in Apple are up almost 50 percent and Google is down nearly 2 percent.
At a peak near $150 a share in June 2008, RIM traded at more than 40 times forward earnings expectations.
CHALLENGES AHEAD
Susquehanna's Fidacaro, who values the stock at eight times his estimate for 2012 earnings, said more optimistic share price targets, some as high as $90, harked back to a lost age, when RIM had a near monopoly on mobile devices with secure corporate communications.
"The challenge for analysts and investors is getting the valuation multiple right on a stock, especially in tech, which has earnings that will be potentially declining year over year," Fidacaro said,
Analysts said RIM's increasing reliance on emerging markets also carries risks. Emerging markets brought in 52 percent of sales in the quarter to August 28, but sales there are less profitable for RIM for a variety of reasons.
Key new-growth markets, including India, Saudi Arabia and the United Arab Emirates, have threatened to shut BlackBerry services if they can't get access to encrypted data, one of RIM's main selling points.
Other analysts focus on likely gains as the Torch's OS 6 operating system is rolled out for other products. They expect security concerns to be resolved soon and take comfort from stronger guidance from a company that is usually conservative in such matters.
"If it the Model T of the industry it's looking like a hot rod version right now," said Wunderlich's Matthew Robison, who held his price target at $67. "If these product cycles work we may be making analogies to Porsche, which has been making 911s for 46 years," he added.
Dushan Batrovic from Dundee Securities raised his price target to $70 from $65 and maintained a "buy" recommendation.
(Reporting by Alastair Sharp; editing by Janet Guttsman)