Credit Suisse analyst Kulbinder Garcha thinks the latter, and says he’s taken a lot of heat for his “underperform” rating and a $100 price target that’s nearly 20% below the $121 it’s trading at today.
But in a note today, Garcha repeats his view that the Street’s EPS estimate for fiscal 2010 — $5.41 per share — is still 18% too high. Why?
- The smartphone market is growing as fast as he thinks it can. He’s already predicting the market will accelerate to 64% unit growth in 2009 after 37% growth in 2008.
- RIM’s business with AT&T — 25%-30% of its hardware revenue — is unsustainable. He thinks RIM’s AT&T share — 70% in the June quarter — will drop as AT&T focuses extra attention on Apple’s (AAPL) new iPhone 3G.
- New business with Verizon won’t make up for lost share at AT&T. With the touchscreen ‘Thunder’ coming this winter, Garcha estimates RIM could get 55% share at Verizon in the December quarter, up from 32% in the March quarter. But that won’t offset share loss at AT&T, he says.
- As RIM focuses more on consumers — their fastest growing segment — new products are going to put pressure on average sales prices and gross margins. He predicts fiscal 2010 ASPs will decline by 11% and gross margins will fall to 47.6% from 49.7% in fiscal 2009.
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