Pacific Crest’s James Faucette today offers a bit of a reprieve for the beleaguered shares of Research in Motion (RIMM), currently making new lows and down 55 cents, or 3%, today at $17.50.
“While we have been quite negative of RIMM for a long time, we believe that it may be time to lift our foot. A little. For a while.”
Faucette doesn’t recommend buying the shares, but he can “certainly see some reasons why value investors could be beguiled into taking a renewed interest in the stock.”
The primary reason for being less negative, he writes, is that there won’t be any evidence of a meaningful decline in services revenue for the BlackBerry network service until May at the earliest. And since service revenue is the most serious concern, the primary bear point is unsupported until then:
Persistent declining service revenue isn�t likely to materialize until the May quarter at the earliest. Because of the outage, we almost certainly will see a sequential revenue decline in the November quarter, but unless things are even worse than we expect (and we are very negative), service revenue should bounce back in the Feb qtr (barring another prolonged service outage).
Then, too, the stock is below book value, which he estimates at $18.92 a share, though there is some risk of about $3 worth of write-downs to book from accounts receivable, he estimates.
At some point, RIM will “see its earnings power collapse” because it will “lose its ability to monetize its subscriber base,” but that’s not going to happen for several quarters yet, and it’s certainly not imminent.
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