RIMM - A Buy, Pre-Earnings

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RIMM - A Buy, Pre-Earnings

By Zacks Investment Research on March 18, 2009 | More Posts By Zacks Investment Research | Author's Website

We maintain our Buy recommendation with a reduced valuation target for Research In Motion, Ltd. (RIMM), the manufacturer of BlackBerry smart-phone devices, ahead of 4th quarter fiscal 2009 financial reporting.

Recently, management indicated that the company’s 4th quarter gross margin will decrease to approximately 40%, but revenue is expected to maintain sequential growth as newly launched high-end handsets experience significant market traction. We expect the smartphone device market to gain momentum should economic conditions improve and as demand for portable mobile access remains firm on a global basis.

In addition, BlackBerry enjoys a strong brand value supported by a healthy financial position with net cash balance of nearly $2.5 billion. Our 6-month target of $70 is based on 20.3x P/E our fiscal 2010 earnings estimate and supported by the company’s technological superiority and market share position.

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