Analysts Preview & Set Tone for RIM Earnings (RIMM)

Research-in-Motion Ltd. (NASDAQ: RIMM) is due to report earnings later on this week.  Estimates have come down and there is a huge short interest that will almost certainly come into play right before and after the earnings report.  We have seen two detailed analyst calls tempering expectations.

Canaccord Genuity’s T. Michael Walkley has maintained his HOLD rating, with a $15 price target.  His note said, “monthly channel checks indicated weak sell-through trends for BlackBerry 7 smartphones despite increased marketing efforts. With strong share gains for the iPhone 4S, increasingly price-competitive Android smartphones, improving Windows smartphones, and strong initial sales trends for the new iPad, we anticipate increasing competition across all of RIM’s products.”

Shaw Wu of Stern Agee has reiterated his Neutral rating.  He noted, “RIMM will report its February quarter this Thursday, March 29, 2012, after the close. Due to much lowered expectations with the Street cutting estimates aggressively over the past few weeks, we believe RIMM may report a decent quarter and guide less worse than expected. Because of this, we would not be surprised to see a near-term relief rally in RIMM shares. However, we remain Neutral rated as we continue to be concerned with the company’s longer-term fundamentals and execution on its upcoming BB10 OS transition.”

Stern Agee is basically calling for a decent quarter, but only on lowered expectations.  Wu further noted, “Based on our supply chain analysis, we believe RIMM may report a decent quarter, in-line with consensus estimates at $4.55 billion in revenue and $0.82 in EPS, which is already at the lower end of its guidance range of $4.6-4.9 billion in revenue and $0.80-$0.95 in EPS. The reason is that since we cut estimates 3 1/2 weeks ago (see our 2/28/12 RIMM note), consensus estimates have also been cut dramatically. It is no longer a surprise that results may come in light. One potential positive is less promotion activity in the quarter which may allow the company to hit its 38% gross margin guidance vs. 37% last quarter.”

As a reminder, RIMM has one massive short interest.  We do not consider it a value stock, but a value trap.  We recently had a trader talk with us about how to play the eventual RIM under $10.00 with speculative put options at a low-premium.

JON C. OGG