RIM channel checks look good

RIM is trading at prices that are half the low (C$100) we were getting used to. It hasn’t been at C$50 since May 2007, which wasn’t that long ago of course.

This for our friends at Thomas Weisel Partners, in the lead up to the November quarter:

“We spoke with more than 60 AT&T and Rogers stores this past week, and found overwhelming evidence that recently launched Bold Blackberry is off to a great start and, in many cases, is already the top selling smartphone. In fact, many sales people described the Bold as “flying off the shelf” though 93% of stores still had at least one in stock. We expect the Bold, the new Pearl Flip and the soon-to-be launched Storm to enable RIMM to continue to take share and outgrow the market. At the same time, we don’t believe RIMM will be totally immune from dramatic slow down in both consumer and enterprise spending, which has had a negative impact on the handset sector in recent weeks, most recently by competitor Nokia, which pre-announced on Friday (Nov. 14, 2008). We are therefore lowering our revenue and earnings estimates, as well as our 12-month price target to $90 from $110, but maintain our Overweight rating as we believe RIMM still represents one of the few remaining growth stories in technology.

Details of checks: We had phone conversations with more than 60 AT&T and Rogers stores in the U.S. and Canada over the last week. Nearly all the stores pointed to either Bold or Apple’s iPhone as a top seller among smart phones, and many salespeople recommend the Bold over the iPhone. Notably, 20% of sales people said the Bold was the most popular smartphone and another 27% said it was either the Bold or the iPhone. It was quite clear that despite AT&T having more than 10 new smartphones introduced in the last few months, the popularity contest was a two horse race between the Bold and iPhone.

Our new assumptions: Due to the impact of a slowdown in consumer and enterprise spending, we are lowering our growth assumptions for RIMM. We are also assuming slightly more margin pressure due to the slower growth and significantly increased competition in the smartphone space. We are now forecasting net-adds of 10.7mn in FY09 and 13.2mn in FY10 (23% growth) and total units of 25.8mn in FY09 and 34.3mn in FY10 (33% growth). For FY09 (May), we are lowering our revenue and EPS estimates from $11.03bn and $3.55 to $10.92bn and $3.51. For FY10, our revenue and EPS estimates go from $15.92bn and $4.96 to $14.31bn and $4.15; the Street is at $15.63bn and $4.68.

Target dropped from US$110 to US$90.”

MRM
(disclosure – I own RIM)