Bay Street and Wall Street analysts are showing more optimism on RIM over the last 24 hours. Here's a quick recap of what's going on.
Byron Capital is a tiny firm most of you haven't heard of before, but their head of research is none other than the awesome Tom Astle - one of Canada's smartest tech analysts. He's also known for his casual writing style, which I'm a huge fan of. As discussed over at Cantechletter.com, he upped his target on RIM to $14 yesterday.
Astle is looking at fiscal 2015 estimates, which I'll remind everyone is pretty much the same as calendar 2014 (RIM's fiscal year ends February). He models RIM to sell 31 million BB10 handsets that year with an ASP of $450 and 20% gross margin, which implies a cost of $360 to make. Keep in mind this is a working model used to justify a $14 target. We all know (and he discusses) that margins could be higher or lower.
Most other analysts are assuming a $400ish ASP, and over the last 24 hours I've pinged several of my contacts to discuss what reality might look like on pricing. Most people I've spoken to seem to believe a higher price should be achievable for BlackBerry 10, which is a positive. So I think Astle's estimate looks pretty reasonable.
Goldman Sachs also upgraded the stock today. Their thesis? They bumped their target to $16 because they thinkconsensus estimates for next year's earnings are too low. Most analysts, they say, are underestimating ASP and gross margin improvement that comes along with BlackBerry 10. They believe BlackBerry 10 ASP will be over $400 (I should hope so). Why does this matter? Because when analyst estimates start rising, investors take notice. It usually leads to positive momentum for a stock as the crowds jump on board. It's short term thinking as usual - but that's the market rolls.
Not every analyst is in love with the stock. But more of them are warming up to it and being forced to re-evaluate fairly negative assumptions on the launch of BlackBerry 10.