(Refiles to fix date in first paragraph) (In U.S. dollars unless noted)
By Wojtek Dabrowski
TORONTO, June 24 (Reuters) - Research In Motion Ltd RIM.TO RIMM.O is expected to post earnings and revenue at the high end of analyst forecasts on Wednesday, while the upcoming launch of the BlackBerry Bold smartphone may set the stage for a strong performance in the rest of the year.
Analyst expectations are for sales of about $2.3 billion and earnings of 85 cents a share, when RIM announces first-quarter results after markets close.
“We believe another beat-and-raise quarter and building excitement over the upcoming ... (BlackBerry) Bold should provide fresh wind in RIM’s sails,” Citi Investment Research analyst Jim Suva wrote in a recent note to clients.
RIM announced the launch of the BlackBerry Bold last month. It’s a top-end smartphone aimed at the company’s core of business users and RIM hopes it will drive customers to upgrade their current devices.
RIM has managed to weather the slowdown in the U.S. economy so far, but some analysts concede the possibility that turbulence in the financial services industry could eventually slow the company’s momentum.
Rob Sanderson, an analyst with American Technology Research, has a 12-month target price of $205 on the shares. They are currently around $140 on Nasdaq.
Even so, Sanderson cautions that “the largest risk to our target is a collapse in growth multiples if the U.S. economy hits a wall.”
The severity of the U.S. slowdown is a matter of heated debate, but data suggests the economy has hit more than just a rough patch. U.S. consumer sentiment slid to a 16-year low in June, according to data released on Tuesday.
This is important for RIM, which has targeted the broader retail market in a bid to diversify its customer base beyond the executives, politicians and other professionals who have been its mainstay. Big layoffs in financial services, meanwhile, could erode RIM’s base of business customers.
That said, RIM’s last quarter appeared to allay macroeconomic concerns, as the company said its profits more than doubled.
Importantly, co-Chief Executive Jim Balsillie said the company had not seen any slowdown among business users outside normal seasonal trends.
Analysts believe device upgrades and new product launches will be key to RIM’s growth for the balance of the year.
Aside from the BlackBerry Bold, media and technology blog reports have also surfaced about a touch-screen device the Waterloo, Ontario-based company may be planning for later this year as an answer to Apple Inc’s AAPL.O iPhone.
Analysts have also highlighted pictures that have leaked onto the Internet of a purported flip-phone BlackBerry, code named Kickstart, with no specified launch date.
Meanwhile, the options market has also been abuzz ahead of RIM’s earnings release and many option investors are bracing for big stock move in its wake, said William Lefkowitz, options strategist at vFinance Investments in New York.
“The bias is toward an upside earnings surprise again,” he said. “Both RIM calls and puts have been active since the end of last week.”
RIM has thus far seemed to triumph over every competitive worry raised by analysts and investors regarding its growth. For example, it has long dismissed concerns that the iPhone could create stiff competition for both business and retail users, and has continued to post impressive subscriber gains.
It has predicted it will add another 2.2 million users this quarter, which would give it a total of more than 16 million subscribers.
And even though the recently unveiled next-generation version of the iPhone is better equipped than the original, to appeal to business users, analysts agree it likely won’t unseat RIM from its dominant position in that market sector.
Investors have continued building RIM positions following the company’s last earnings report on April 2. Since then, its shares are up roughly 20 percent, and were around C$143 on the Toronto Stock Exchange on Tuesday morning.
“We think the strong upcoming product cycle and a growing appreciation for RIM’s differentiated business model will continue to buoy investor sentiment and valuation and will lead to further gains for RIM shares,” Citi Investment’s Suva wrote.
However, despite positive comments from management regarding the U.S. economy, Sanderson said RIM’s lofty share price could suffer if a serious recession takes hold.
“We believe RIM can grow through a recession as long as it is not severe, though the earnings multiple would likely retract,” he wrote in a recent note. (Additional reporting by Doris Frankel in Chicago; editing by Frank McGurty)