Zacks Says Hold RIMM, But Raises Price Target

Faced with the relentless upward rise in the shares of BlackBerry maker Research in Motion (RIMM), and the undoubtedly high price-to-earnings ratio of the company’s stock, Zacks Investment Research analyst David Weissman today does what many of us, myself included, would do: punt.

After describing the shares as priced to perfection in a research note Friday morning, trading at a forward P/E of 49 times, based on profit for the year ending in March, 2009, Weissman cautions investors away from the stock, noting “we are concerned that any lumpiness in forthcoming quarters may result in a precipitous change of investor sentiment.”

But nevertheless, “We raise our valuation target in anticipation of future growth prospect over the near-term.” Specifically, he’s raising his price target on the shares to $135, writing, “Our $135 price target is based on a P/E of 56.25x estimated earnings for fiscal 2009, a premium over its peers due to the company’s solid product pipeline.”

There you have it: stock priced to perfection! Watch out! But also realize it will probably deserve to be even more expensive at some point in the future.

That’s RIMM for ya: tough one to call.

Research in Motion shares are down a fraction of a percent Friday at $117.25.

Comments

[John Lazerow]

This guy's forward PE is way off - I show mean first call consensus earnings of $3.39 for 2009 fiscal. That equals 34x. The company grew 100% last quarter YOY and if they hit 2009 numbers, it will be 50% growth over 2008 (vs. mean estimates of $2.24).

The rich valuation of the shares reflect the high growth prospects yet the shares still trade at a discount to forward growth (forward PE of 34x vs. earnings growth FY08 to FY09 of about 50% = .70 PEG). Doesn't look too bad to me...even looks cheap if you believe the "smart" phone growth story over the next few years.