Research In Motion: Pullback Presents Buying Opportunity

Disappointing first quarter results from Research In Motion Ltd. (RIMM) that have at least temporarily turned the market sour on a stock that had risen more than 8% in the past month and 25% in 2008 may present the buying opportunity many investors were waiting for.

Analysts Jeffrey Fan with UBS and Mike Abramsky at RBC Capital Markets are among many on the Street that remain bullish with $165 price targets on RIM shares. They pointed to the BlackBerry-maker’s investments as a sign of its commitment to be a bigger player in the handset market.

Canaccord Adams analyst Peter Misek feels the pullback is a buying opportunity as RIM’s launch of more than six devices during the next 12 to 18 months is expected to propel further growth. He raised his price target on RIM shares to $225 from $200 and reiterated that it remains a “top pick” on the firm’s Best Ideas list.

Mr. Fan told clients:

Though it appears to be at the expense of near-term earnings, we expect the benefits to start to materialize this fiscal year.

He expects the stock will see heightened volatility around product launches and other announcements. These include a new clamshell BlackBerry and another version of the Curve named Javelin in the middle of the November quarter, a touchscreen BlackBerry in November or December, and an iDen device by the end of the year.

Mr. Abramsky said the company is its best position ever as the smartphone market hits an inflection point and is investing “to achieve dominant global handset status.”

He expects a “broad consumer assault” in the second half of 2008, which RIM expects will be its strongest back half in history, with new handset like the touchscreen, Flip, Slider, 3G Pearl and other BlackBerrys. This push mirrors similar investments RIM made in 2005 and 2007 that paid off handsomely for investors, the analyst added.

Mr. Abramsky boosted his fiscal 2009 revenue estimate to $11.4-billion from $11-billion, and to$16.6-billion from $15.1-billion for 2010.

Mr. Fan raised his forecasts to $11.2-billion from $10.7-billion in 2009, and to $14.7-billion from $14-billion in 2010.

Citigroup’s Jim Suva, however, did lower his price target on RIM shares from $165 to $160, saying it was not a typical quarter for the company, but sentiment will like turn with the launch of the BlackBerry Bold and other products.

He agrees that RIM’s investments to capitalize on the unique opportunities in the marketplace signal its willingness to forego short-term profit for longer-term growth.

The analyst maintained his “buy” recommendation saying RIM is making the right decision to “strike while the iron is hot.”