Wednesday, February 16, 2011

RIM: Citi Says Buy As Nokia Promotions Going Away

Woah — Citigroup analyst Jim Suva today raised his rating on Research in Motion (RIMM) to Buy from Sell, without passing through Neutral, and set an $80 price target, writing that Nokia’s (NOK) deal with Microsoft (MSFT) should start to benefit RIM as carriers flip their promotion dollars to RIM.

Suva’s had a Sell rating since November of 2009.

Nokia’s shift in strategy is going to create a “multi-quarter gap in Nokia products and carrier promotion support,” writes Suva, after meeting with “several international carriers” at the Mobile World Congress show in Barcelona, which is going on all this week.The carriers, “commented on their forthcoming shift to promote other handset OEMs ([Google's (GOOG)] Android, Apple (AAPL), and RIMM) until Nokia’s product strategy is more realizable. Nokia, he notes, has 35% global maret market share to RIMM’s 3%.)

Suva notes that “carriers do not want to promote and push devices that will become obsolete in the near future as long term customer support is important to carriers,” and anyway, products that get carrier support are supposed to have longer shelf life, he observes. “This promotion commotion shift away from Nokia to other OEMs … will take center stage as Nokia loses share in the quarters ahead.” And the shift “should materially help RIMM’s sales & profitability for the next several quarters, and valuation at 10 times consensus is very compelling when we see upside to expectations.”

Suva adds that Europe, where Nokia has had 30% of cellphone units and 35% of smartphone units, may offer “the best combination of critical mass and available market share for RIM.” He insists that “While RIM’s market share has seen some pressure of the last two quarters due to Android, we nonetheless believe that RIM should be able to capitalize on a confusing Nokia strategy.”

Suva is keepnig his estimate for EPS this year of $6.32, as the fiscal year ends this month. But for fiscal 2012, he’s looking for $6.74, way, way up from $5.62. He sees RIM’s sales rising 12% in the calendar year 2012, to $26.55 billion, which is double the growth rate he had ben predicting previously.

RIM shares this morning are up $1.58, or 2.4%, at $66.88. Nokia shares are up 7 cents, or 0.8%, at $9.14.

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