RIM: FBR Cuts Target to $14; Sees In-Line FYQ4, Lower ’13

FBR Capital’s Scott Thompson this afternoon reiterates a Market Perform rating on shares of Research in Motion (RIMM) while cutting his price target to $14 from $17, writing that the company’s fiscal Q4 will probably meet expectations, but that things will continue to deteriorate in coming quarters before they get better.

Thompson expects “the business to deteriorate” for “several quarters” as the company competes with the growing presence of low-cost smartphones based on Google’s (GOOG) Android operating system in international markets.

What’s more, “it has become apparent that near-term M&A possibilities are off the table while RIM’s earnings power continues to deteriorate,” writes Thompson. On that score, he elaborates as follows:

We view a sale as unlikely until the business metrics become more predictable. We believe that RIM�s best chance of a takeout offer may be behind it due to the company�s rapidly deteriorating business metrics and lack of earnings power, which could make it difficult to attract a credible offer.

Thompson may have been making reference to recent rumors that Samsung Electronics (005930KS) might take a stake in RIM.

Turning to financials, the “lack of a preannouncement” for the fiscal Q4 that ended last month, writes Thompson, “leads us to believe that the quarter is likely tracking to the low end of guidance but within the company�s guided range.”

Thompson actually raised his estimate to $4.6 billion from $4.56 billion for Q4′s revenue, but cut his EPS estimate to 80 cents from 82 cents after slightly shaving his gross margin estimate to 37.9% from 38%.

For the current fiscal 2013, his estimate goes to $16.6 billion, down from $17.2 billion previously. He models $2.57 per share in profit, down from a prior $2.76 estimate.

The Street is modeling $4.55 billion and 82 cents last quarter, and $17.5 billion and $2.81 per share for this fiscal year.

Regarding the news on Friday from Bloomberg that the company may give developers a test version of its forthcoming “BlackBerry 10,” or BB10, handsets in May, Thompson is cautious:

While we believe a refreshed product and more competitive smartphone design would help stem the tide of defecting developers, investors are looking for a BBRY 10 device that is capable of competing with industry- leading devices. A soft device preview may send the stock to new lows as investors look to the next product cycle.

RIM shares today are 48 cents, almost 4%, at $14.14.

Fin