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Analyst Reactions Before Research In Motion Ltd (BBRY)’s Q1 2014 Earnings

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U.S stocks have tilted lower lately on fears of a slowing Chinese economy and the U.S Federal Reserve’s plan to unwind U.S stimulus. Research In Motion Ltd (NASDAQ:BBRY) was one of the few gainers in the technology sector on Monday, climbing 2.8% to $14.75 per share. The company is set to report earnings results for the first quarter of fiscal 2014 before the opening bell on June 28.

BlackBerry Ltd (NASDAQ:BBRY)

Research In Motion Ltd (NASDAQ:BBRY)’s stock price reached an intraday high of $18.32 on January 24 over optimism ahead of its BlackBerry Z10 and Q10 smartphone unveiling. Since then, prices have dropped, rallied and consolidated after various stock ratings, store checks and upcoming quarterly estimates from industry analysts.

For Research In Motion Ltd (NASDAQ:BBRY)’s fiscal third quarter, analyst forecasts for earnings per share range from $(0.11) to $0.50, with a consensus estimate of $0.06. Analyst forecasts for sales range from $2.7 billion to $4.3 billion, with a consensus estimate of $3.4 billion.

Bullish Analysts

Société Générale (SocGen) analyst Andy Perkins upgraded Research In Motion Ltd (NASDAQ:BBRY) from a Sell rating to a Buy, revealing that channel checks show heightened sell-through demand for BB10 units. SocGen estimates sales of 5 million BlackBerry (BB10) handsets, above Wall Street’s consensus of 3 to 4 million units for the quarter.

“We are forecasting Z10 sales to be in excess of 4 million handsets with Q10 sales just under 1 million units,” Perkins said. SocGen boosted its price target on Research In Motion Ltd (NASDAQ:BBRY) to $17 from $13.

Peter Misek of Jefferies & Company reiterated a Buy rating on BlackBerry shares, and a $22 price target. BlackBerry Z10 sales have slowed down, but Misek states the robust demand for the Research In Motion Ltd (NASDAQ:BBRY) Q10 will offset the slowdown. He expects BlackBerry to announce stronger-than-expected BB10 shipment numbers and beat Wall Street’s consensus estimates.

Misek stated that one of BlackBerry’s main BB10 manufacturers, Jabil Circuit, Inc. (NYSE:JBL), reported impressive “high velocity” revenues that may foreshadow a strong May quarter for BB10 handsets. Jabil Circuit’s fiscal 2013 third quarter revenues increased 5.1% to $4.5 billion. Jabil’s High Velocity revenue segment, which primarily represents sales to Research In Motion Ltd (NASDAQ:BBRY) and accounts for 29% of Jabil’s revenues, ballooned to $1.3 billion, up 23% from a year ago.

Despite strong sales, Jabil Circuit, Inc. (NYSE:JBL)’s profits dropped 51% as a result of high restructuring costs. Net income came in at $50.1 million or $0.24 per share, down from $101.3 million or $0.48 per share a year ago. For its fiscal fourth quarter, the company forecasts High Velocity revenues to increase 15% year-over-year.

Bearish Analysts

Bernstein Research analyst Pierre Ferragu downgraded Research In Motion Ltd (NASDAQ:BBRY) shares from Market Perform to Underperform and slashed his 12-month price target of $15 to $10. The New York research firm carried out channel checks with operators and distributors across Europe to evaluate BB10 support. Channel checks revealed a lack of BB10 excitement from consumers and among corporate customers. However, BlackBerry CEO Thorsten Heins stated that 55% of users who bought the Z10 switched from other devices such as Apple’s iPhone and Samsung’s family of Galaxy S smartphones.

“Our latest channel checks suggest that consumer take up is slow and we believe adoption of BB10 in the enterprise may be slow and only partial,” Ferragu said. “Blackberry 10 is being tested at only 60% of Fortune 500, which implies the share of defectors could be very large.”

Management Outlook

Thorsten Heins expects to break even, but his company may show a profit. In the company’s fourth quarter conference call, Heins warned about the company bolstering its marketing expenses by 50% to market the new BB10 devices, dampening operating income.

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