After a Q2 that was roundly greeted with a “not as bad as I expected” assessment from investors and analysts alike, the mood going into this holiday report its nearly festive. Careful, says Byron Capital’s Research Head Tom Astle.On Thursday, Research in Motion (TSX:RIM) will report its Q3, 2013 numbers. After a Q2 that was roundly greeted with a “not as bad as I expected” assessment from investors and analysts alike, the mood going into this holiday report its nearly festive.
Careful, says Byron Capital’s Research Head Tom Astle. The analyst says the jovial mood around BB10 that has sparked a strong rally in RIM shares is perhaps obscuring the fact that RIM is in a tough spot in this quarter. Astle thinks RIM will continue to lose money on BlackBerry 7 devices. If they do sell enough of them to meet topline expectations, he says, the company will likely miss on the bottom line.
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Astle believes RIM’s Q3 adjusted EPS will come in at a $.48 loss on a topline of $2.5 billion. He thinks the company sold 6.5-million units in the quarter. The Byron analyst notes that RIM’s current share price is near the then-bold $14 target he placed on the stock less than a month ago, but says he is comfortable with his BUY rating and price target because he sees limited downside based on book value support.
RIM’s cash position will be closely scrutinized, says Astle, and on that front he sees no dramatic shift. His current model, he says, suggest that free cash flow, before any working capital changes, will be slightly negative, perhaps a loss of approximately $80-million. RIM had a cash position of $2.1-billion at the beginning of Q3.
Astle says the most important part of Thursday’s news will be the BlackBerry 10 update. He says there is a mountain of work to be done around the release including including “device OS and hardware stability, BES and server software functionality, migration tools, internal and third-party apps and a ready supply chain.”
While many of us will be sipping nog in front of the fire in a matter of days, Astle says he expects a lot of RIM employees will be working through the holidays.
Yesterday, RIM announced it had launched a technical preview of BlackBerry 10 phones for 120 select customers, including 64 Fortune 500 companies. BlackBerry 10 will launch on January 30th.
At press time, shares of Research in Motion on the TSX were down 1.5% to $13.46.