Updated from Dec. 22
Research in Motion
surged after the maker of the popular BlackBerry handheld devices reported earnings that sharply beat expectations for its fiscal third quarter. The company, which swung to a profit, also forecast two quarters of guidance well above Wall Street expectations.
After the bell on Wednesday, RIM reported sales of $153.9 million, up 107% from last year's levels and above the analyst consensus estimate for $146.4 million.
Net income amounted to $16.3 million, compared to a loss of $92.8 million a year ago. On a per-share basis, profit stood at 20 cents a share, according to generally accepted accounting principles.
In Tuesday trading on the
, shares were up $14, nearly 30%, to $60.15.
RIM took a charge of $9.2 million, or 11 cents a share, to cover the costs of litigation. Excluding those costs, RIM's adjusted net income per share would have been 31 cents.
On a pro forma basis, analysts had expected 17 cents.
The revenue breakdown for the quarter was 56% for handhelds, 29% for service, 9% for software licenses and 6% for OEM radios and other revenue. RIM said the total number of BlackBerry subscribers increased by 154,000 from the prior quarter to around 865,000 subscribers.
"RIM completed another successful quarter marked by strong performance and a multitude of BlackBerry launches around the world," said co-CEO Jim Balsillie. "We are particularly pleased to report higher than expected subscriber growth in the quarter, resulting from strong execution and momentum in our carrier channels."
Michael Abramsky of Canaccord Capital, who has a buy on the shares, points out that RIM guided for almost double the first quarter consensus for next year. Based on its current momentum, he says RIM could stand to earn as much as double consensus expectations for FY 2005, which begins in March (the estimate for which now stands at $1.04 of earnings per share).
"That's a bit of a long way off, but hypothetically they could," he says.
To be sure, short-sellers have been voluble on the stock, arguing its
valuation has outrun its prospects.
But Abramsky, whose firm has no investment banking relationship with RIM, argues, "They need to be given credit for execution at this point." Assuming the company manages $200 million in sales next quarter -- about the midpoint of the guidance issued after the close -- it will claim 2004 sales growth of 90% over last year's levels, he notes.
Based on Monday's closing price, RIM shares traded at 44 times the FY 2005 earnings estimate of $1.04 (which analysts are bound to substantially increase, based on the latest guidance).
While that may sound pricey, it's actually not unreasonable given RIM's hyper growth rates, contends Abramsky. He offers
as a comparison. Though Nokia changes hands for only around 17 times '05 earnings, it's expected to see far more muted growth in the neighborhood of 2.5% year on year, according to Thomson First Call estimates.
Abramsky doesn't own any shares of RIM.
As for guidance, for the fiscal fourth quarter now under way, RIM projected sales of $195 million to $210 million, with GAAP earnings per share of 30 cents to 40 cents. Pro forma EPS (excluding a charge for patent litigation) should be 45 cents to 55 cents a share.
That's far above analysts' consensus estimates for $155.8 million and EPS of 22 cents.
In the following quarter -- the first of RIM's fiscal year 2005 -- the company expects sales in the range of $220 million to $240 million. Earnings should fall between 35 cents and 50 cents on a GAAP basis and 50 to 65 cents on an adjusted basis.
Currently, analysts have penciled in $158.4 million and 23 cents EPS for the first quarter, which ends in May.