- Merrill Lynch is raising their 12-month price target on Research in Motion (NASDAQ:RIMM) from $110 to $135, based on applying RIM's 3-yr average forward PE of 28x on CY08 EPS estimate of $4.86. In firm's opinion the new Blackberry Pearl platform extends RIM's earnings momentum till at least 2008, warranting a longer term view on the stock.
Why the firm continues to favor RIM?
RIM's new Pearl smartphone is a unique combination of design and functionality and can be a game changer like Apple's iPod and Motorola's RAZR.
The Pearl benefits from RIM's superior back-end network and software (Slipstream) capabilities, which enable faster web, GPS, search and multimedia features.
Pearl expands RIM's market to 4x larger consumer space. Of the ~80mn smartphones sold in the past year (per IDC), firm estimates only 20% were sold for enterprise applications (RIM's traditional base) while remaining were purchased by consumers. They believe RIM's addressable market could grow substantially (IDC projects 33% CAGR till 2010) and believe RIM could also grow its market share from the current 7% level. We estimate for every 1mn BlackBerry handsets sold beyond our 8.9mn handset shipment projection for FY08, EPS could grow by 7%.
T-Mobile said on Friday that Pearl sales are well ahead of all internal forecasts. Overall firm's positive view on the stock is based on firm's expectations for successful forthcoming launches at Cingular (November) and Verizon (in 2007) as well as other variants of the Pearl, including a full (QWERTY) keyboard in 2007. They also expect a thinner version of the 87xx BlackBerry device, aimed at enterprise segment, to be released next year.
Maintains Buy.
Notablecalls: While RIMM looks extended, this note will create some buy interest.
Why the firm continues to favor RIM?
RIM's new Pearl smartphone is a unique combination of design and functionality and can be a game changer like Apple's iPod and Motorola's RAZR.
The Pearl benefits from RIM's superior back-end network and software (Slipstream) capabilities, which enable faster web, GPS, search and multimedia features.
Pearl expands RIM's market to 4x larger consumer space. Of the ~80mn smartphones sold in the past year (per IDC), firm estimates only 20% were sold for enterprise applications (RIM's traditional base) while remaining were purchased by consumers. They believe RIM's addressable market could grow substantially (IDC projects 33% CAGR till 2010) and believe RIM could also grow its market share from the current 7% level. We estimate for every 1mn BlackBerry handsets sold beyond our 8.9mn handset shipment projection for FY08, EPS could grow by 7%.
T-Mobile said on Friday that Pearl sales are well ahead of all internal forecasts. Overall firm's positive view on the stock is based on firm's expectations for successful forthcoming launches at Cingular (November) and Verizon (in 2007) as well as other variants of the Pearl, including a full (QWERTY) keyboard in 2007. They also expect a thinner version of the 87xx BlackBerry device, aimed at enterprise segment, to be released next year.
Maintains Buy.
Notablecalls: While RIMM looks extended, this note will create some buy interest.
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