Research In Motion: Opportunities Offset Near-Term Risk

Bear Stearns analysts Andy Neff, Bill Hand and Ted Chung sent a note to clients this morning on Research In Motion (RIMM). Key excerpts:

Opportunities Offset Near-Term Economic Risk; Reiterate Outperform

• MULTIPLE STRATEGIC/STRUCTURAL OPPORTUNITIES VS. NEAR-TERM ECONOMIC RISK. Meeting with RIMM at World Mobile Congress, while we are aware of the economic risks to business trends, we come away positive about potential upside from multiple drivers: new products expected (3G, elegant design, touchscreen), new geos ramping (e.g., China), new segments emerging (lower-cost email, families) and new applications (e.g., corporate apps, consumer). Risks include execution (new products, yesterday's outage), more competition in consumer.
• FAVORABLE STRATEGIC SHIFTS. We don't see meaningful competitive threats to derail RIMM's edge in the enterprise. For consumer, we see a secular shift from phones to email-based phones ("WIDgets") as consumers consider biennial upgrades. Moreover, we are seeing numerous (mostly non-US) carrier partners lower the entry price of email (prepaid, 5-euro email-only).
• BLACKBERRY UNITE LAUNCHES. Announced September 2006, Blackberry has launched its Blackberry Unite software (enables calendar linkage, other features) with Telefonica in Spain, the beginning of a multi-carrier, multi-country rollout, which could spur family plans.
• WHERE IS RIMM IN ITS GROWTH CYCLE? To us, the wireless internet device market is in the early stage of growth as handsets shift to smartphones such as Blackberry, iPhone, Google-based phones. RIMM has a compelling advantage owing to its position in the enterprise, end/end solution, brand image, carrier relations, business model.
• MAINTAINING ESTS. Given favorable channel checks, we're maintaining our post-option EPS estimates of $2.24 for FY08, $3.50 for FY09 and $4.92 for FY10. For FY4Q08, we're maintaining our EPS of $0.70 vs. $0.34 (RIMM will report on 4/2). (We lowered estimates for covered companies on 1/14.)
• MAINTAINING TARGET OF $141-$159. We're maintaining our CY08 target of $141-$159 based on a 30x-34x P/E on our CY09 operating EPS estimate plus ~$4 in net cash/sh.

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