Goldman Likes RIM

Analysts are divided on RIM lately. Goldman Sachs analyst Simona Jankowski advised owning the stock heading into the earnings report. Jankowski said that following a round of retail checks, she "walked away with increased confidence in our May quarter estimates." She says consumer demand is stronger, with all major products - the Bold, Curve, Javelin and Storm - continuing to "sell very well." On the other hand, she expects slowing in April, with Verizon expected to end its "buy one, get one free" promotion:at the end of March. But shes a pick up again around Mother’s Day and graduation promotions. Jankowski said enterprise demand is "significantly weaker," but that the company still will meet expectations.

Jankowski said she would be a buyer of the stock heading into earnings for three reasons:

• She expects in-line results and guidance, "which should provide relief for the shares" given recent underperformance, with the stock down 25% since February 10, compared to a 2% decline over the same stretch for the S&P 500. She also notes that short interest is at a 6-month high.


• Jankowski also expects the company to guide for sequential gross margin improvement after a 10% drop over the past two quarters. Driving higher margins: improving yields, lower component pricing and fewer rebates.


• And three, she says valuation is compelling at 11x her calendar 2010 GAAP EPS estimate, compared to a median 20x multiple for communication technology shares.
  Jankowski maintains her $57 price target on the stock.

There were other noteworthy - and more cautious - comments on the stock this morning:

Citigroup’s Jim Suva maintains his Hold rating and $46 target. He writes that the focus will be on May guidance and gross margin commentary; he asserts that RIMM in the May quarter is likely to post its first sequential drop in net subscriber adds. He also writes that he is “increasingly concerned” that enterprise demand could begin to drag just as the consumer market competition gets tighter.

Credit Suisse’s Kulbinder Garcha this morning repeated his Underperform rating and $37 target on the stock, and contends there are risks to the consensus estimates for the May quarter.