RBC: RIM’s turnaround remains cloudy

While sales of Research In Motion’s brand new BlackBerry 7 devices won’t be reflected in RIM’s second-quarter earnings report next week, analysts still aren’t sold that the device launches have positioned RIM to rebound. In a note to investors on Thursday morning, RBC Capital Markets analyst Mike Abramsky wrote that he expects RIM’s earnings in the fiscal second quarter to narrowly beat the consensus, with revenue down 2% from the same quarter last year to $4.5 billion and earnings per share at $0.90. The Street sees revenue at $4.5 billion as well, but EPS estimates are slightly lower at $0.87. Abramsky also expects BlackBerry handset shipments to slide 9% from the first quarter to 12 million units, and PlayBook shipments are expected to grow from 500,000 in the first quarter to 650,000 in the second. Read on for more.

RBC believes RIM will also beat the Street’s consensus with its third-quarter guidance. While Wall Street expects revenue and EPS projections of $5.3 billion and $1.36, Abramsky is expecting revenue to fall between $5.5 billion and $5.8 billion with EPS in the $1.54-$1.58 range. He expects RIM to ship between 13.5 million and 14.6 million BlackBerry smartphones in the third quarter, 70% of which will be BlackBerry 7 devices, and PlayBook shipment growth is seen to slow as totals come in at 750,000 units.

Abramsky still sees RIM’s turnaround as uncertain in the near term despite better-than-expected performance. Checks performed by RBC at 90 Verizon Wireless, AT&T, Sprint and T-Mobile stores seem to indicate decent performance of RIM’s new BlackBerry 7 devices with 20% of stores having sold out of their inventory, though we do know that supply is something of an issue with some carriers. The big question mark is still QNX, however, as investors are looking for successful launches and fast adoption of RIM’s next-generation platform before confidence is restored. Abramsky sees several risks for RIM including lagging competitiveness and potential missed execution, and he is looking at the impact QNX device launches have on RIM’s North American market share next year as something of a barometer.

RBC reiterated its Sector Perform rating on RIM stock and maintained its $35 price target.

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