SAN FRANCISCO -- It seems there's no stopping Research In Motion ( RIMM). While smartphone rivals Motorola ( MOT) and Palm ( PALM) have
stumbled , the Canadian maker of the ubiquitous BlackBerry has surged ahead with a stream of new products and a foray into international markets such as China and India. Even Apple's ( AAPL) much-vaunted iPhone has been unable to dent RIM's standing as the undisputed smartphone leader for business users. As RIM readies to report its second-quarter results later Thursday, analysts expect the company to further consolidate its position by not just beating expectations on revenue and EPS, but also showing strong growth in its subscriber additions.
For the second quarter, analysts polled by Thomson Financial are expecting earnings of 49 cents a share on revenue of $1.36 billion. The company posted EPS of 25 cents on revenue of $658.5 million a year ago. RIM has forecast subscriber additions of 1.32 million to 1.37 million in the second quarter. Analysts also will be sifting through the company's earnings report for details on gross margins and average selling prices for clues that the company can successfully manage the move from a mostly business-user base to adding more consumer accounts into the mix. RIM currently gets about 75% of its revenue from business users. Estimating the impact of the company's quarter on the stock is a difficult call as most of the near-term gains are likely built into the current stock price, says Rob Sanderson, an analyst with American Technology Research, which doesn't own shares of RIM or have an investment banking relationship with the company.
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"As long as the adoption story looks on track and execution remains strong, pullbacks will likely be bought," wrote Sanderson in a recent research note. "We expect that any potential retreat on expectations would not last long." Shares of RIM closed Wednesday up 2 cents to $96.28. The company's stock has soared nearly 40% in the past three months, so even if RIM delivers powerhouse numbers, the stock's sky-high valuation could mute investors' response, says Mike Abramsky, an analyst with RBC Capital, which makes a market in RIM shares. "With valuation at 44 times forward 12-month consensus and P/E at a four-year high there's less room for a significant upside surprise against rising Street expectations," he says. "While not expecting problems, there's less room for error in execution or unexpected negative developments." But analysts haven't always nailed how RIM will trade on quarterly results: The stock jumped
more than 16% after it reported its first-quarter results in June. Short-term movements aside, RIM's fundamentals remain solid, say analysts, and the company is expected to offer strong third-quarter guidance. Wall Street expects RIM to report EPS of 55 cents on revenue of $1.51 billion in the third quarter. RIM has launched a number of new devices in the last three weeks that should drive sales in the coming quarter.
On Monday, RIM introduced the BlackBerry Pearl 8130, the first Pearl smartphone to run on CDMA networks such as Verizon's ( VZ) in North America. On Sept. 25, RIM launched the BlackBerry Curve 8320 with built-in Wi-Fi support available on T-Mobile. A week before that, RIM said it is bringing the BlackBerry 8820, a device with Wi-Fi capabilities and built-in Global Positioning Satellite capability, to AT&T's ( T) network. With its new devices, RIM has hit upon the perfect blend of design and utility, giving it a significant lead over rivals. For investors the key question now is how big RIM can get, says Sanderson. "We no longer receive questions on sustainability of competitive position and rarely get questions on margin structure," he wrote. "Now most conversations are regarding total addressable market, likely penetration and longer-term growth rates. This is a significant shift in investor sentiment and understanding of the RIM story."