Shares of Research in Motion (RIMM) are down another 25 cents, or 1.5%, at $16.52 this morning following a 10% decline on Friday on the company’s cut in its financial outlook and re-positioning of its “PlayBook” tablet.
Analysts continue to ratchet down estimates, and cut price targets.
UBS’s Phillip Huang has perhaps the harshest cut to outlook thus far: this morning Huang reiterates a Neutral rating and cut his price target to $18 from $26, after cutting his fiscal 2013 revenue estimate to $17.4 billion from $20.4 billion, and cutting his EPS estimate to $3.87 from $4.73.
The current quarter’s outlook will be key, he thinks, and he’s modeling $4.53 billion and $1.07 per share. But the company’s fate hinges on defending the service business, transitioning to “BBX,” the new software environment for the BlackBerry, and making “compelling devices.” He’s skeptical the company is a take-out target.
Sterne Agee’s Shaw Wu, who has a Neutral rating on the stock, writes that he was not surprised at the shortfall, as he’d downgraded a week ago based on his sense Street estimates were too high.
Next come losses from the PlayBook, he writes:
From our follow-up supply chain and industry checks, our understanding is that RIMM was blindsided by AMZN pricing its Kindle Fire aggressively at $199. We estimate that RIMM will be losing $50-$75 per PlayBook sold. In addition, AAPL�s aggressive pricing on its iPhone 4 and 3GS isn�t helping either.
Wu lowered his revenue estimate for fiscal 2013 slightly to $20.8 billion from a prior $20.9 billion while maintaining his $4 per share estimate.
Meantime, R.W. Baird’s William Power, who rates the stock Underperform, cut his 2013 view to $17.92 billion and $3 per share from a prior $19.98 billion and $3.95 per share.
Furthermore, Power thinks RIM is not being totally forthcoming about the nature of the inventory buildup it has said it is dealing with.
It’s not just the PlayBook, Power thinks:
In fact, RIM clearly planned on shipping more BlackBerry units in Q1 and Q2 based on its guidance. In Q1, the company guided to 13.5-14.5 million units, but came in at 13.2 million units. In Q2, RIM guided to 11-12.5 million, but shipped 10.6 million. We believe this could be part of RIM’s inventory problem as well [�] As a percentage of Cost of Goods Sold, RIM’s Inventory balance reached 54% at the end of Q2’12. This is well above its historical average and above most of the peer group. For comparison, Apple currently runs at 4.6%, Dell at 11.8%, and Motorola Mobility at 30.9%.
Is there a sliver of hope? Yes, there is.
Brigantine Advisors’s Kevin Dede reiterates a Buy rating this morning. Even though he’s cut his estimate for this year to $19.2 billion in revenue and $4.33 per share in EPS, from $19.8 and $4.78 a share, he still sees support for a $25 price target.
“As RIM remains dauntlessly committed to PlayBook, we are standing on our Buy rating citing a mere 5x our $5.00 FY13 estimate�we’ve made no changes�for a $25 value.”
Dede maintains a some-what mixed view of the prospects for QNX/BBX:
Indications of the release time have surfaced regarding RIM’s next generation of devices based on its new QNX- based operating system. While we believe the PlayBook shines as an example of the lukewarm reception we believe these devices could receive, should market demand come in much stronger than our expectation, RIM’s business could return to past levels.
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