RIM Upgraded at JPMorgan

It says a 27% hammering is overdone.
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A two-month slide that has zapped one quarter of

Research-in-Motion's

(RIMM)

market cap is overdone for a company that could see revenue rise 20% a year through 2009, JPMorgan said in upgrading the stock Wednesday.

JPMorgan upped RIM to overweight from neutral. At Tuesday's close of $64.80, the brokerage noted, the stock costs 21.7 times its 2007 pro forma earnings estimate of $2.98. According to JPMorgan, that's roughly a 10% discount to the valuation afforded comparable companies' shares.

The brokerage expects RIM's earnings before interest, taxes, depreciation and amortization to post a compound average growth rate of 29% through 2009, while revenue should rise by 19.9%. The firm also expects RIM's subscriber count to double over the next 18 months to more than 10 million.

"RIM's global reach, close carrier relationships and a rapidly expanding enterprise-middleware platform add to its sustainable competitive advantage, despite competition from handset OEMs,

Microsoft

and other end-to-end solution providers," JPMorgan wrote.

"Positive catalysts lie ahead in the second half of 2006, including: the introduction of consumer-oriented handsets; the introduction of enhanced Web-based services (including multi-media); and deployment of enterprise-grade fixed-mobile voice convergence solutions based on the acquired Ascendant Systems platform," it said.

RIM has fallen 27% since touching $88.71 in mid-March.

"Arguably, the decline in RIM's multiple makes sense in the context of the firm's seven consecutive quarters of declining y/y revenue growth, recent downward revisions to guidance, and recurring litigation overhangs," JPMorgan said. "However, we expect revenue growth to reaccelerate in the fiscal fourth quarter of 2007 and we believe management has set expectations to more reasonable levels heading into FY07. The litigation threat remains."