Research in Motion is likely to report a jump of almost 37% in first quarter profit on Thursday and fears the BlackBerry maker is losing out to rival Apple may be unfounded, some analysts said.
Concern that other smartphone makers, including Apple, which recently launched the 4G version of its best-selling iPhone, may be on the verge of making inroads into RIM’s key business market have hurt the company's stock in recent months.
RIM’s shares are down more than 12% year-to-date, compared with an almost 28% gain for Apple. The decline has made the Waterloo, Ont.-based company’s shares an attractive investment, according to Scotia Capital analyst Gus Papageorgiou.
“The street is clearly concerned about RIM’s competitive position and future in the smartphone market, concerns we believe are almost entirely without merit,” he said in a note.
“These concerns have delivered a very attractive valuation on the name and we would encourage investors to develop or maintain an overweight position.”
RIM is forecast to release results after the stock market closes on Thursday.
Analysts on average expect earnings per share of about $1.34, compared with 98 cents in the year-ago period. Revenue is estimated at about $4.4 billion.
Earlier this month, investment house UBS cut its share price target for RIM by $5 to $70, saying it was seeing evidence newcomers may be chipping into the Canadian company’s market leading share of the corporate market.
“Checks indicate increasing interest in some alternative enterprise e-mail solutions,” it said. “Although visibility at this point remains limited and new competition broadly unproven, we believe a number of market factors could potentially open the door to the first credible challenge to RIM’s enterprise dominance.”
The downgrade came shortly after U.K. bank Standard Chartered said it would let employees switch from the BlackBerry to the iPhone for professional use.
Another concern has been the decline in the average selling price for RIM, with the company selling more lower-end models, potentially cutting into its profit margins.
Last quarter, the average selling price was $311 and that is expected to fall to between $305 and $310 this quarter, RIM said at the end of March.
That may be offset by greater volumes as the company pushes into emerging markets. Scotiabank forecasts shipments of 11.5 million devices for the quarter.
Kaufman Brothers analyst Shaw Wu also said RIM continues to experience strong demand for its devices. He expects the company to report profits in the middle of its guidance range of earnings of $1.31 to $1.38.
"We are picking up continued momentum in international markets driven by the Curve 8520 and Bold 9700," Wu wrote.
Morgan Keenan analysts also said that investor fears may be overblown and that RIM’s devices are maintaining ground against smartphones using Google’s Android operating system.
