Monday, September 25, 2006

Calls of Note Part 6

- Goldman Sachas comments on Research In Motion Ltd. (NASDAQ:RIMM) ahead of results sayingthey expect in-line revenues/EPS (ex- ESO) of $644mm/$0.72 on an operating margin of 27.0%. Consensus estimates are for Revenue of $645mn and EPS of $0.71. Firm's estimates are supported by expectations for 1.3mn device unit shipments and 687K new subscriber additions yielding total subscribers of 6.3mn at the end of 2QFY07.

With shares up 30%-plus since July, November quarter subscriber guidance and commentary around new device launches will be a key determinant of near-term stock performance. The firm believes that Street expectations for November subscriber growth are for 750-780k in new subscriber additions. Further, while they do not expect Management to issue February new subscriber guidance on Thursday's call, they believe expectations are forming for 13-15% in sequential growth in 4Q07.

The firm believes that Management will choose to remain conservative in its near-term guidance as they see little incentive to issue aggressive guidance at this early stage of the product cycle. As a result, guidance could disappoint as they believe that expectations have recently increased on the back of the Pearl product launch. Firm would use any near-term weakness in the shares as a buying opportunity given that the long term fundamental outlook remains strong.

Maintains Buy and ups tgt to $110 from $96.

Notablecalls: Goldman is hedging their bets smartly ahead of results. They saw the s*itty guidance coming from Palm (NASDAQ:PALM) and knew they needed to cover their a*ses. Even if RIMM misses, these comments set it up for a bounce.

No comments: