RIMM

Source: RIMM Estimates, Goldman Sachs Research

Last night I ran into a some old friends while I was out and within minutes they were bombarding me with questions on their stock portfolio and what they should do, do you like XYZ, what do think of the market, etc. Finally, one of them asked me a question regarding analysis, particulary what I look for. Without hesistation, I answer him with "forward looking catalysts". During earnings, many people look for a firm's EPS and see if they beat or miss but the pros don't focus too hard on the EPS but rather guidance (forward looking). Anyways, the point of the story is that I look for catalysts that move stocks and tonight I present my case for RIMM.

RIMM has been a monster stock over the past few years but many wonder if the growth can continue. Above are some estimates that Goldman Sachs put together; however, I will discuss some qualitative catalysts that can fuel RIMM higher.

1. Cisco - RIMM Mobile Voice System Agreement- This agreement will allow RIMM to expand to services beyond wireless e-mail. There is a low blackberry penetration (2%) for the current top 9,500 customers, so with this partnership, it can give RIMM an way to increase that.

2. More Agreements to Come - RIMM got partnerships with Cisco and HP but could be in talks with IBM and SAP to develop more opportunties to expand their offerings. This will help blackberry expand their footprint.

3. Opportunties in Healthcare - The Obama Adminstration is demanding that the healthcare system provide more efficiency. The efficiency require more and better IT standards, where files will be trasmitted electronically. Some states have required that doctors have Blackberrys, in case of emergency transmission of prescriptions or important medical records. There is a good chance that this will continue and many other people within the hospital have them as well.

4. New inventories will be needed - Many employers are using older blackberries and will need to upgrade them, so new software can be used. Technology spending is starting to bottom (great article in the WSJ on that last week), so RIMM can benefit.

Now to valuation. From a P/E perspective, it depends on what The Street assigns as a multiple. With a 18x mulitple on 2010 earnings, the stock is worth $85. APPL, a key competitor, is given a 23x mulitple, so if you believe they are equal, RIMM is worth $108. In my view, I think it's worth between $82-$88, so $85 sounds fair. It could hit $90-$94 on the high end because I believe big tech will be a popular place to go. I am not long yet, but will take a position soon.