RIMM – All across the board…
If you’ve ever been interested in purchasing Research in Motion (RIMM) stock, you’d probably be confused with all the different analyst opinions because they are all across the board. How is this company so unpredictable? RIMM is the maker of Blackberries which are incredibly popular.
They released their 1st quarter results last evening and the stock has dropped more than 5% today. In the past quarter, they added 4.9 million subscribers alone and with a net of 46 million subscribers, they generated $4.35 billion in revenue. Recently when I went to an Alicia Keys concert, it looked like half the people had blackberries. They were texting and trying to take pictures with them. It seems like people either have an iPhone or Blackberry. It’s amazing how dominant these 2 companies are in the smart phone market. However, the performance of this stock is based on the expectation of enormous future growth and from this point of view, they have disappointed analysts. There is a lot of action on this stock and from my own experience, I’ve taken losses and gains so I’m always looking to get back into it.
So what have analysts been saying? There have been quite a few bulls for this stock prior to the release and this is what I found interesting. It takes a lot of good news for this stock to pop but where would this good news come from? They did not have any “wow” products and in some markets they had a buy 1, get 1 free offer. When it’s buy 1, get 1 free, I think everyone knows that the consumer demand has taken a hit. I wanted to particularly single out one analyst, RBC Capital markets.
RBC Capital Markets says that RIMM is a “Top Pick”. This is as good as it gets and their target price prior to yesterday’s earnings release was $120. Today they updated their target price from $120 to $90 but are still saying that RIMM is a “Top Pick”. I think it’s great that they have promptly changed their target price to $90 although I don’t know how realistic this is but why is this still a “Top Pick” ? How can you drop the target price by 25% and still say that this is a top pick? Isn’t there another company that is better to buy? This is why I think some analysts are absurd. It’s clear that this stock has been trending downwards and has been doing so for months yet this analyst is still so bullish. It has a lot of competition with the new Apple iPhone, the HTC phones, the Google Android phones, etc.
The last time that this stock was $120 was Sept 2008 and that was about the same time it was in the $90 range too after that insane market crash we had in September. How is this stock expected to double in price? I believe RBC Capital Markets was the most bullish on this company out of all analysts and consequently, is giving the worst advice.
Furthermore, other analysts covering this stock are more reasonable.
On June 4th, UBS had a target price for RIMM at $70 and today they lowered that target price to $65.
Today, Robert W. Baird lowered the target price from $88 to $59. Both UBS and Robert W. Baird are neutral on this stock.
If RIMM starts to trend upwards again and there is more news on new products, such as competition to the iPad, I’d take a look at it again. For now, I’m sure there are more interesting companies to invest in.