Research In Motion (NASDAQ:RIMM) getting plenty of comments following quarterly report.
- Merrill Lynch notes that Feb Q sales were up 66% YoY to $930.4mn, shy of their $942mn forecast, as ~100K handset shipments were delayed. EPS of $1.01 was inline with strong gross margin of 53.5%, offset by increased spending on stock options investigation. Firm estimates these temporary effects cost RIM about $33mn in lost sales (100K handsets at $336 ASP) or 4-7c in EPS. While inline results could disappoint short-term investors, firm believes long-term trends remain solid.
May Q outlook on sales ($1.05bn), subscribers (1.14mn), handsets (>2.25mn) and EPS ($1.05) was largely inline with their recently raised estimates. However, pent-up demand for RIM's new product launches (Verizon Worldphone, T-Mobile WiFi Blackberry) could drive meaningful EPS upside (+4c to10c) during the May quarter. New applications/partner launches during RIM's analyst day (May 7 - coincides with WES Conference) could also create positive headlines, in firm's view.
- CIBC says that while RIMM came in a bit below their aggressive expectations, they see growth opportunities and a strong foundation for the company. But with the stock priced for perfection, the in line quarter and outlook are likely to weigh on investor enthusiasm and question the possibility of near-term upside.
Firm expects a modest pullback in the share price and remain comfortable with their SP rating. This reflects the strong outlook, but is balanced by the opex increase and changing mix and risk profile. Depending on the magnitude of the pullback, a buying opportunity could arise.
- With respect to stock options review, ThinkEquity notes that they previously interpreted the company's no "intentional misconduct" language in conjunction with the lack of high-level employee departures as a sign that the future impact from ongoing regulatory investigations would likely be benign. The SEC's escalation to a formal investigation suggests that things on the stock option pricing front will likely get worse before they get better.
Firm says that senior management's handling of the pricing investigation expenses, while well-meaning, is one of the strangest things they have seen on the management/governance front. It appears to us more an admission of guilt than a good faith gesture and it has an aftertaste of "too little too late."
- Cowen notes that guidance for the May ending quarter is somewhat uninspired, capturing standing GAAP EPS consensus of $1.04 (new range os $0.99-$1.07). Lower GMs, higher legal & administrative costs associated with the ongoing OSC/SEC inquiries and a higher tax rate keep a lid on earnings forecasts for a second straight quarter. Higher revenue is driven by sub guidance (1.125-1.15MM) , hardware units.
Firm's EPS estimates are essentially unchanged despite a much higher top-line. At ~34X their standing C08 EPS estimates - and little upward movement to numbers - firm sees RIMM's multiple coming in a bit.
Notablecalls: RIMM's in-line results and guidance were disappointment for the buy-side. Looks like there's more of the same to come as higher opex and options overhang push out the margin expansion. Add higher risk associated with the options investigation and you can see why the stock is trading at the lower multiples today than it was yesterday. See no reason to hold the shares at the current pre-market levels of around $136.