Research in Motion (RIMM): Risks of Missing Feb Quarter Unit Guidance and Negative Pre-Announcement- Jefferies

Jefferies & Co analyst Peter Misek is making some fairly cautious comments on Research in Motion (NASDAQ:RIMM) this morning in a note titled:

“Risks of Missing Feb Quarter Unit Guidance and Negative Pre-Announcement”

– Firm is cutting their RIM estimates and target based on their belief that there is a greater than 50% chance that RIM will negatively pre-announce the Feb quarter. They believe sales of both RIM’s low-end and higher-end phones continue to be challenged. Jeffco believes consensus estimates for FY13 are too high and revise their FY13 EPS estimate to $1.87 (JEF prior $2, St $3.07). Firm cuts their target to $12 and reiterate their Underperform rating.

The details:

Preliminary survey work and checks indicate a missed quarter. We believe there is a greater than 50% chance that RIM will negatively pre-announce the Feb quarter and that RIM will miss the low-end of their 11M to 12M guidance range. We adjust our Feb quarter estimates from 12M units to 10.5M units and revenue/EPS to $4.2B/$0.69 (JEF prior $4.6B/ $0.82, St $4.6B/$0.83). If RIM does make their guidance we believe the difference between sell-in and sell-through would cause a correction in the May quarter suggesting a very weak guide for May. Either way we see consensus numbers as too high.

Sales of RIM’s low-end handsets are deteriorating across geographies. We believe RIM’s low-end handset sales trends have continued to deteriorate in North America, Latin America and Europe. In particular, sales in Europe decreased significantly towards the end of the quarter. We believe this is very negative as sales outside of the U.S. had typically been more resilient. Our checks indicate that sales in Asia seem to be okay.

Higher-end handsets continue to be challenged by iPhone and Android. We believe higher-end handsets are doing poorly outside of Enterprise sales with continued iPhone 4S and Android momentum (especially Samsung) causing issues. We believe an iPhone 5 launch (we expect end of Q2/Q3) ahead of the BB10 launch (we expect Sep) will be particularly troubling. The BB10 will also have to compete head-to-head in H2 with Microsoft/Nokia as the Windows 8 platform attempts to become the #3 player. Moreover, we believe RIM will not launch any major new handsets before BB10.

We believe Street estimates for FY2013 are too high. We are cutting estimates our FY13 EPS estimates from $2.00 to $1.87 (St $3.17). We believe Street numbers will likely be revised down given the lack of major new products in the near-term and continued sales challenges due to competitive pressure from both low-end and high-end devices.

Notablecalls: Note this call comes after another well-timed RIM downgrade by Misek. The stock is likely to get hit on this but it also manages the expectations. So once the warning comes, you may be served best taking the other side of the trade s-t.

Just my 2 cents.

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