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Research In Motion: RBC Ups Rating; Upbeat on Margins

January 20, 2009
by Eric Savitz
Blogger and Columnist, Barron's, Tech Trader Daily

Eric Savitz

Research In Motion (RIMM) shares are getting a lift today from RBC Capital analyst Mike Abramsky, who raised his rating on the stock to Outperform from Sector Perform. He upped his price target on the stock to $75, from $45.

Abramsky’s previous cautious view was based on worries over reduced margin visibility, execution issues and recession-related growth headwinds. But he notes that the stock has dropped 28 percent since it reported fiscal Q2 results. His new three-part thesis:

  • Margin visibility is improving
  • Execution is recovering
  • Performance exceeding lowered expectations.

Abramsky notes that the company provided an unpleasant shock for investors late last year when it guided to a sharp drop in gross margins. But he says that with mix improving and costs coming down, hardware margins should stabilize. Meanwhile, he also says the company has addressed recent execution challenges, including product delays, quality issues and shortages.

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