Foolish Forecast: No Rimshot for Research In Motion

Ubiquitous Blackberry maker Research In Motion (Nasdaq: RIMM  ) will report fourth-quarter 2008 financial results on Wednesday, April 2. Let's see whether it's gotten the email about posting better-than-expected earnings.

What analysts say:

  • Buy, sell, or waffle? With 33 analysts covering RIM, there's no shortage of prognostications, but 27 of them do rate it a buy. Five are saying hold, while only one has hit the delete button with a sell. There's been a strong movement of opinion to the upside, as only 22 analysts had thought Research was good enough to buy at the start of the quarter.
  • Revenue. Sales are expected to double in the quarter to $1.85 billion, having slowly moved up in expectations over the course of the quarter.
  • Earnings. Similarly, analysts are expecting profits to more than double to $0.70 per share.

What management says:
With management raising expectations of subscriber growth 15% to 20% higher than its previous forecast, analysts are suggesting that Research In Motion may hit the higher end of forecasts. It's quite a different scenario than that of Apple's (Nasdaq: AAPL  ) iPhone, which experienced a bit of a "seasonal" hiccup.

Investors need to watch how the doom-and-gloom of the capital markets and the economy plays out. Some two-thirds of RIM's customers are corporate and government; cutbacks and layoffs en masse, could curtail the company's further growth, at least temporarily. Yet with its new 3G phones set to roll out this summer, it can capitalize on the woes of Motorola (NYSE: MOT  ) and its plan to divest itself of its handset business.

What management does:
One Deutsche Bank analyst who remains cautious about Research In Motion questioned why the raised guidance for subscribers didn't lead to a simultaneous increase in revenue and earnings growth. The anaylyst suggests the discrepancy owes to higher inventories of unactivated phones at the end of last quarter.

Margin

12/06

03/07

06/07

09/07

12/07

Gross

55.1%

54.6%

53.6%

52.5%

51.6%

Operating

27%

26.6%

26.5%

27.1%

27.8%

Net

17.2%

20.8%

20.7%

20.7%

21.1%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

What CAPS Fools say:
Here's how the company stacks up against some of its peers and competitors on Motley Fool CAPS:

Company

Market Cap (billions)

PE Ratio

CAPS Rating

Research In Motion

$63.6 billion

60.6

**

Apple

$126.7 billion

31.6

****

Motorola

$20.6 billion

NA

**

Palm (NASDAQ:PALM)

$535.4 million

NA

*

Nokia (NYSE:NOK)

$123.0 billion

11.1

****

Source: Yahoo! Finance and CAPS.

One Fool says:
Despite the rosy outlook, Research In Motion looks expensive when compared to its rivals, even though analysts find it currently priced below their targets. While Apple experienced a pause in subscriber growth, RIM missed a chance to get a leg up on the iPhone when it had to delay its 3G phones. We know that the Motorola business will give it some room to run, but the company has tough competition offering essentially the same technology. At 61 times trailing earnings (and 33 times forecasts for 2009) Research In Motion is priced to a level of perfection that seems awfully hard to meet.

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