Buy RIM because of “surprising operational progress” says Cormark

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Cormark analyst Richard Tse says RIM's platform transition remains an uphill battle, but RIM's "surprising operational progress" has given it wiggle room between BlackBerry 7 and BlackBerry 10 that many critics didn't think it could spare

Cormark analyst Richard Tse says RIM’s platform transition remains an uphill battle, but its “surprising operational progress” has given the company wiggle room between BlackBerry 7 and BlackBerry 10 that many critics didn’t think it could spare

Yesterday, Research in Motion CEO Thorsten Heins revealed, in a letter to CNET, that the company’s long anticipated BlackBerry 10 platform is currently being tested by more than fifty carriers.

The news sparked a rally in the company’s shares today, on the TSX RIM closed the session up more than 10% to $8.68.

Cormark analyst Richard Tse says RIM’s platform transition remains an uphill battle, but RIM’s “surprising operational progress” has given it wiggle room between BlackBerry 7 and BlackBerry 10 that many critics didn’t think the company could spare. This operational execution, says the Cormark analyst, gives him comfort in his assessment of the break-up value of RIM. Tse pegs the net asset value of the BlackBerry maker somewhere between $9 and $14, depending on whether you include or exclude cash the company has on hand. In a research update to clients today, Tse reiterated his BUY rating and $12 target price on Research in Motion.

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Late in September, shares of RIM rose after its Q2 results weren’t as bad as expected. RIM lost $235 million, or $0.45 cents per share on revenue of $2.9 billion in Q2, which was up 2% from the company’s $2.8 billion topline in Q1. The numbers were better than the street’s consensus, which was that RIM would lose $.54 cents a share on revenue of $2.5-billion.

RIM ended the quarter with cash, cash equivalents, short-term and long-term investments of $2.3 billion, up from $2.2 billion at the end of the previous quarter.

While the fact that management was able to stem its cash burn is a part of why he has issued a BUY on RIM, Tse say he believes the major part of the equation is that valuations for technology companies, particularly those in hardware and especially those with a consumer bent, are dependent upon what he calls “the power of product cycles”. Tse expects sentiment around RIM’s product cycle will help reverse its fortunes because early industry feedback of BlackBerry 10 has been surprisingly positive.

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  • http://twitter.com/ke_meth Kermeth Cuebas® 

    I’m excited for BlackBerry 10