First response from the Street is trickling out regarding Research in Motion’s (RIMM) announcement this morning that its “PlayBook” tablet computer will go on sale on April 19th.
Abhey Lamba with ISI Group writes that he expects RIM to ship 150,000 PlayBook units through the end of May, for $71 million in revenue in the fiscal Q1 ending that month.
The PlayBook’s price, starting at $499, is likely to result in a hit to RIM’s gross profit margin, he estimates, with the device likely having gross profit of just 10% of sales.
But any hit to RIM’s overall profitability is minor, as the number of units is low. For every 100,000 units shipped, Lamba estimates at fifth of a percentage point (20 basis points) reduction in gross profit for the company overall.
Things may turn out better, he believes, if RIM is able to increase the mix of units sold toward the higher-end $699 model. (There will also be additional, cellular models of PlayBook, assumedly at higher prices, coming later this summer, I would add.) And Lamba expects RIM’s own cost to manufacture will become more favorable over time.
Lamba writes that RIM’s fiscal Q4 report this Thursday may disappoint: He’s modeling for $5.5 billion in revenue and $1.80 in EPS, below the average $5.6 billion and $1.75, as he thinks the company’s unit sales of BlackBerries may have been toward the low end of the company’s forecast for 14.5 million to 15 million units. That’s in contrast to several reports out in the last week that seem to be raising expectations for the quarter, including some bears on the stock.
Lamba reiterated a Hold rating and a $65 price target.
Meantime, Caris & Co.’s Robert Cihra this morning reiterated a Buy rating on RIM shares and a $75 price target, offering up a totally different set of profit metrics: he sees the PlayBook turning in 20% to 25% gross margin, and cutting overall corporate gross margin by half a percentage point.
Moreover, while the PlayBook will be dilutive to margin, it will “certainly add to EPS,” he believes, and he models $7.01 per share this fiscal year in EPS, above the average $6.79 estimate.
Cihra sees the company selling 1.7 million units this calendar year, focusing the sale of PlayBook on its “tight security, initial handset tethering and multiple [BlackBerry Enterprise Server] hooks.” Even if the company sells no units outside its base of 60 million BlackBerry accounts, “we nevertheless see that base affording RIMM a unique pool to target for incremental revs/profits, something most Android wannabes can’t say.”
Ah, but Brian Blair with Wedge Partners is the spoiler this morning, writing, “We continue to expect tepid sales for the 7 inch tablet and believe the company will sell less than 2 million units this calendar year vs. our expectations for Apple’s iPad at 40+ million units.”
Blair thinks Wall Street is overestimating the device’s potential, modeling between 5 million and 6 million units this year.
Blair lists as his reason for his regard a general skepticism about the seven-inch form factor; skepticism about developer support for the PlayBook’s “QNX” operating system; the lack of appeal for the “tethered” approach to the PlayBook’s calendar and email support; and the belief that the “overall value proposition” is low versus Apple’s (AAPL) iPad and the fact that there will be “a sea of competitors over the next few months.”
RIM shares today are up 25 cents, or 0.4%, at $62.42.
Update: Credit Suisse’s Kulbinder Garcha today writes that he has not yet included PlayBook estimates in his numbers for RIM. However, he believes every 1 million units of the PlayBook could increase EPS by 1% to 2%. As for the Thursday’s report, Garcha is modeling units slightly below consensus, at 14.6 million, and argues RIM is making gains in most international markets, largely at Nokia’s (NOK) expense. Garcha rates RIM shares Outperform, with an $85 price target.
Article courtesy of Tech Trader Daily