RIM: A Good Bet in a Recovery

Thinking ahead, UBS analyst Jeffrey Fan Friday morning upped his rating on Research In Motion (RIMM) to Buy from Neutral, and raising his rating on the shares to $90 from $65. His theory: the stock will be a good bet in an economic recovery.

Fan’s thesis is that lower carrier BlackBerry inventory is partly a function of weakening enterprise replacement demand. He contends that “given little competition in the enterprise market,” as well as limited IT budgets to cover switching costs, depleted inventory of Blackberries in IT closets, continued and pent-up replacement demand and rehiring in an improving economy, “hardware units can drive material upside” to consensus estimates for the February 2011 fiscal year.

For FY 2011 he raised his EPS forecast to $4.78, from $4.66. For FY 2010, he moves up a penny to $4.55.

“Although calendar 2010 is still some time away, we believe visibility to replacements (barring no economic recovery) is fairly good,” he writes. “We recommend investors look to RIMM ahead of the recovery.”

RIMM Friday morning is up $2.18, or 3.1%, to $71.68.

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Comments

[LilBob]

This is an interesting problem to me. Normally, buying electronics stocks in a period of economic recovery would be a no-brainer, as companies replace stocks of materials that were on an extended replacement schedule during the period of economic downturn. But, right now we're in a period of high gold prices-it appears that Gold is the next bubble-and Gold is an essential component of the SDIM RAM chips without which these devices are essentially door-stops. So those relacement schedules may be extended even further as logistics managers start looking at replacement costs only to find that the unit they thought would be $40 cheaper because it was last years model is now $40 more than it was last year.

2009 May 01 07:58 PM

[Paul Harper]

Have to agree with you Bob. Spoke with a good friend on Friday who heads up the EMEA Comms of one of the larger banks. Blackberry's are being seen as non essential tools for a strata of employees in banking, whereas befor the bank had handed them out all the way down to secretaries.
I agree with the premise that buying into stocks like RIMM when we are on the bounce is a good idea, I just have the feeling taht there is a little more pain to come before we get there, so I'll be hanging fire on enterprise technology stocks until we see more stability & a sustained recovery in the S&P.

2009 May 02 10:28 AM