Scotia Capital Analyst: Competition Not Slowing Research In Motion

The second half of fiscal 2009 and 2010 will be a strong period for Research In Motion Ltd. (RIMM) with an array of product launches accompanied by a big marketing push, according to Scotia Capital’s Gus Papageorgiou. He has an “outperform” rating on RIM and price targets of C$214 and C$246 per share for the next 12 and 24 months, respectively. The analyst also believes the Street’s expectations for fiscal 2010 are too low.

While RIM’s recent first quarter profits were slightly lower than expected, the company’s overall results showed strong growth, Mr. Papageorgiou told clients.

He said:

RIM’s “stealth bullish” second quarter guidance, although slightly weaker than expected, remains “strong given a slow summer period and very little in terms of new device volumes.

He also noted that RIM’s purchase of patents for roughly $200-million after the quarter, which followed $310-million the previous quarter, signals a continuing trend. The analyst assumes roughly $300-million in related cash flow for next year.

As for the stock, Mr. Papageorgiou feels any investor sentiment calling for overall profitability levels for this year and next to fall is misguided.

He said:

We believe RIM is about to extend its share gains in the Smartphone market throughout 2008 and 2009.

He added that his estimates assume RIM has 15% of the global market by next year, up from 13.4% in the first quarter. The Street’s estimates imply just 11%, which is “unrealistic in the face of several new device launches and strong commitments from some of the largest carriers in the world (Verizon and Vodafone), in the fastest growing regions (North America and Western Europe) of the Smartphone market, the analyst added.

Despite the competition, Mr. Papageorgiou said launches from Apple (AAPL) and Nokia (NOK) have failed to slow RIM’s unstoppable force.