RBC Capital: Plenty of Upside Left For Research In Motion

Feb.26.07 | About: BlackBerry Ltd. (BBRY)

While gains have moderated somewhat in recent month, shares of Research In Motion Ltd. (RIMM) have been on a tear in the past year, rising more than 125% since hitting a 52-week low of $62.04 in June 2006.

The stock remains near its 12-month high of roughly $142 and many expect it can climb further due to strong subscriber numbers and continuing momentum for BlackBerry sales.

One person optimistic about RIM’s prospects is RBC Capital Markets analyst Mike Abramsky, who says checks show that subscription and shipment momentum will exceed expectations.

One source of strong demand should be from RIM’s CDMA handsets in the second quarter, he said in a research note.

Mr. Abramsky has hiked his price target on RIM shares to $180 from $145, representing upside of more than 25%. He also raised his recommendation to "outperform" from "sector perform."

His fiscal 2008 revenue estimate rose to US$5.1-billion from US$4.7-billion, while his earnings per share forecast is up to US$5.72 from US$5, partly due to what he calls “vigorous momentum from RIM’s product cycle” as well as expectations that this stronger momentum will mitigate concerns over competition.

Some of the threat will come from Apple Inc.’s (NASDAQ:AAPL) iPhone, but Mr. Abramsky thinks its threat to RIM’s emphasis on consumers may be less than some fear.

“If management executes its strategy successfully and expands its addressable market, we believe investors will focus on RIM’s accelerating momentum, accepting some margin declines and higher hardware mix along the way,” he said.

RIMM 1-yr chart:

RIMM 1-yr chart