It’s not often these days that one comes upon an analyst report with something positive to say about Research In Motion Ltd. . But UBS’s Phillip Huang did just that today - albeit it’s pretty lukewarm praise.
UBS analysts visited 17 stores in Canada following the recent launch of RIM’s Blackberry 7.0 phones and found them to be selling reasonably well. “While certainly not comparable to the iPhone launch, and still lagging Androids, sales appeared decent with several reps eager to point us to the new Blackberries,” Mr. Huang wrote. The 99xx Bold phones, in particular, appear to be selling fairly well, he said
Given that the 7.0 products came to market a couple weeks earlier than expected, this could add up to RIM sales coming in modestly stronger than anticipated for August, Mr. Huang suggests.
Of course, Canada is only a small market for RIM, accounting for about 8 per cent of global sales. But these early signals could hint at a reasonably successful launch in larger global markets.
Mr. Huang is still cautious about RIM’s long-term future, expecting a tough transition ahead of its move to the new QNX core operating system in 2012. “While RIM’s new products close the gap with competitors on feeds and speeds, RIM’s ecosystem and apps continue to lag. Further, its main pillars of growth – enterprise and international - are under attack and with 80 per cent plus of its net adds being non-enterprise, RIM is fighting an uphill battle for consumer mind share” versus competitors.
As for speculation that RIM could be a takeover candidate in the wake of Google’s planned acquisition of Motorola announced earlier this week, Mr. Huang is doubtful. “All indications are that RIM intends to go it alone for now and there’s little evidence management would even contemplate an alternative unless at a significant premium,” he said, pointing out such an acquisition would have to be worth “the hefty sum” of at least $15-billion, net of cash.
Upside: Mr. Huang maintained a “neutral” rating and 12-month price target of $30 (U.S.)
Thomson Reuters Corp. stock has been sinking throughout the summer and is starting to approach levels last seen during the credit crisis of a few years ago.
The weakness may not come as a complete surprise, given its markets division, which sells financial data and analysis tools to investing professionals, is particularly vulnerable to swings in the economy. The company announced a management shakeup last month while reporting disappointing quarterly results.
With the economic outlook darkening, National Bank Financial analyst Adam Shine today downgraded the company to “sector perform” from “outperform,” a reflection of reduced valuations he’s now attaching to the company.
Thomson Reuters’ enterprise value to earnings before interest, taxes, depreciation and amortization buckled to a low of just over 6.5 times forward estimates during the credit crisis, Mr. Shine noted.
“Nobody is suggesting that we’re about to see a repeat of the 2008 liquidity crisis and related chaos, but a compression in multiples across most sectors, especially media, is already at hand and gaining momentum amidst recent data and headlines,” Mr. Shine said.
He dropped his EV/EBITDA multiples to 9.5 times his 2011 estimates, excluding integration costs, and 8.25 times 2012 estimates.
Downside: Mr. Shine cut his price target to $35 (Canadian) from $40.50.
Autodesk Inc.’s quarterly results were “far better than people feared,” said Canaccord Genuity analyst Richard Davis, given concerns that the company is about to see a plunge in demand for its low-cost engineering and manufacturing design tools. He believes the recent selloff provides an attractive entry point, even though he cut his price target.
“While macro ebbs and flows are likely to drive trading over the next few months, we are confident that Autodesk has all of the characteristics of a rewarding long-term investment,” Mr. Davis said.
Upside: Canaccord maintained a “buy” rating and cut its price target by $8 to $42.
|TRI-T Thomson Reuters||39.51||
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|ADSK-Q Autodesk Inc.||55.57||
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