Monday, November 22, 2010

Analysts Raising RIMM's EPS Estimates

Today, Oppenheimer & Co. analyst Ittai Kidron became the latest analyst to factor in sales of the PlayBook.  He expects RIMM to sell 100,000 PlayBooks in the fiscal 4th quarter (December to February) and 3.2 million tablets in fiscal 2012 (March to February 2011).  Thus, he raised his next year EPS estimate by $0.55, from $6.60 to $7.15. 

This follows TD Securities' Chris Umiastowski, who on Nov. 12 factored in RIMM selling 3.6 million PlayBooks in FY2012.  He raised his next year EPS estimate by $0.50, from $6.71 to $7.21.  As this blog mentioned on Nov. 14, most analysts had not modeled sales of the PlayBook into their estimates for RIMM.  Thus, I stated that investors can expect a wave of EPS estimate increases.

To date, about 3 analysts have incorporated the PlayBook into their estimates for RIMM.  Thus, more EPS estimate increases ahead are imminent, with most of the 30 plus analysts covering the company to yet model in the tablet. 

Shares of RIMM have been moving up in recent days due to analysts and investors beginning to realize the potential of its tablet.  An article in Reuters on Nov. 18 showed that companies such as Sun Life Financial and ING are planning to purchase the PlayBook

With RIMM still currently trading at a low valuation, and more news about the PlayBook to emerge in the weeks ahead, investors can expect the shares to continue to go up.  My 12-month target price for the shares is US$90.  To show how under-priced the shares currently are, applying a 14 times multiple to Oppenheimer's EPS of $7.15 gives a share price of US$100.1, while TD Securities' $7.21 EPS translates to a price of US$100.94 with a 14X multiple.  The shares closed today at $59.30.  

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