RBC is reiterating their Outperform rating on Research in Motion (RIMM). RBC thinks that the 22% decrease in valuation following Q2 earnings was an overreaction and the stock’s current price represents a compelling risk/reward:
Valuation, down 22% since Q1 results (vs -5% for NASDAQ and -10% peers), is at 0.4x PEG and 26x FTM P/E (2 year low, 25-46x historical); however, RIM’s $17B mkt cap decline equates to almost half of RIM’s FTM consumer business, an overreaction, in our view, given our assessment of RIM’s strengths and opportunity within a growing, global Smartphone market.
RBC also thinks that a raft of coming product launches will help RIMM maintain and grow share:
We expect RIM to gain global handset share vs. NOK, MOT, Samsung, Microsoft, HTC, etc, driven by pending 2H08 product launches (Bold, Thunder, Storm, Javelin, Kickstart, etc) and forecast RIM’s share rising to 2.8% Global Market CY09. Proprietary data from our RBC IQ/Changewave Technology Panel (1,800) suggests RIM is likely to garner strong reception for its planned new form factors: touchscreen, flip and slider.
Finally, RBC believes that the “Apple will outcompete RIMM” narrative has been overdone and that the two companies are more likely to steal share from other handset makers than from each other:
While Apple concerns may sustain near-term risk to valuation, RIM historically has executed successfully against competitive threats, rewarding investors who took advantage of related valuation volatility. We disagree Apple will harm RIM’s franchise, and focusing on ‘RIM vs. Apple’ in our view misses the larger opportunity both have to take share from incumbent handset players.
RBC reiterates $165 target.