Research In Motion: The Street Is Getting Increasingly Worried

Research In Motion (RIMM) shares are going to lose considerable ground today after the company provided a May quarter earnings report that the Street did not like very much. While the company reported EPS that beat estimates, and gross margin exceeded expectations, the company missed at the top line, and came in at the bottom of the guidance range on both units sold and new subscribers added. Further irritating matters, the company said that it has significant new phones coming in the current quarter, but gave few details. But RIMM is not Apple; rather than adding intrigue, the lack of information makes investors in the company even more anxious about the ability of the BlackBerry to hold market share in an increasingly competitive smart phone sector.

Here’s a quick round-up of some of what the Street is saying about the stock this morning:

• James Faucette, Pacific Crest: “The increased competitive environment is beginning to inflict measurable tolls, including rapidly falling replacement rates and a flattening of international shipment growth,” he writes. “We believe the replacement rate has fallen precipitously over the past two quarters while international growth has flattened…Unless the company is able to at least maintain share at the high end of the mobile phone market, it will see rapid margin deterioration. Meanwhile, early previews of the new products have pointed to less revolutionary improvements.” He keeps his Sector Perform rating, but warns that “risks mount.”
• Simona Jankowski, Goldman Sachs: She repeats her Sell rating. “RIM has now missed top-line expectations for three of the last four quarters, in our view demonstrating the building competitive pressures on its business from the iPhone and more recently from Android,” she writes. “We estimate that net subscriber additions in North America declined on a sequential basis, which we attribute primarily to the success of Android-based phones, such as the Motorola Droid and the HTC Incredible at Verizon.”
• Jim Suva, Citigroup: Repeats his Sell rating, while cutting his target to $50, from $55. “May could very well mark the peak quarter for RIMM�s EPS,” he contends. “While almost all other technology companies are facing decreasing EPS growth rates, we believe RIMM will soon face declining EPS.”
• William Power, Baird: Cuts rating to Neutral from Outperform; target cut to $59, from $88. “Based on our store visit findings and product roadmaps, we expect further share gains from Android-based devices, as well as the iPhone,” he writes. “New BlackBerry devices should help, but we increasingly fear it may be too little too late to turn the tide in the U.S. Despite what appears to be an attractive valuation level, we expect competitive concerns to continue to overhang the shares.”
• Matthew Sheerin, Thomas Weisel Partners: Maintains Overweight rating, but cuts target to $82, from $94. “Given its recent track record…we can see why many investors remain skeptical, especially in light of continued competition from Apple and increased pressure from the Android camps. Still, while we are taking a more conservative stance on unit and margin assumptions, and thus trimming our forward estimates, the stock appears still quite inexpensive.”
• Phil Cusick, Macquarie: Keep Neutral rating, but cuts target to $72, from $80. “We expect to see a new slider device, an OS refresh and possibly a tablet device in [the 2010 calendar second half], but expect shares to remain range-bound until investors can see what [CEO] Jim [Balsillie] sees to gain confidence that high-end products can stabilize metrics.”
• Mike Abramsky, RBC Capital: Maintains the stock’s Top Pick status, but cuts target to $90, from $120. “The onus is on RIM to execute and regain investor confidence; we expect valuation to remain rangebound near term on competitive concerns, but for sentiment to improve with rising visibility to improved competitive position and execution,” he writes. “We are trimming our target to reflect market revaluation of RIM’s stock into a peer group of handset vendors facing similar pressures.”
• Ittai Kidron, Oppenheimer: Maintains Outperform rating, but asserts that “If RIMM stumbles, we see a long, unattractive journey of playing catch-up.”
• Kulbinder Garcha, Credit Suisse: Keeps Outperform rating, but cuts target to $75, from $100. He asserts that falling prices will be offset in the months ahead by accelerating sales volumes.
• Brian Modoff, Deutsche Bank: Keep his Hold rating, cuts target to $65, from $75. “The company has yet to address the growing gap in functionality between the Blackberry and true smart phones,” he writes. “While there is still time for them to come up with something new, we see growing interest from consumers in more capable platforms. Moreover, we see many signs of growing enterprise interest as well, threatening RIMM�s core customer base with time.”

RIMM is down $4.06, or 6.9%, to $54.52.