Research-in-Motion (NASDAQ: RIMM) has been a beast of a tech stock. But shares have run up so much and the valuations have risen so much that the stock NEEDS a breather. Shares are down roughly 3% at $95.50 today, after reaching over $100+ highs last week. Currently, RIM has a market cap north of $50 billion, its trailing P/E ratio is over 70, and it trades at roughly 42 times Feb-2008 fiscal earnings.Just yesterday RIM received a downgrade from RBC Capital Markets' Mike Abramsky saying the current valuations and recent monster performance will make it hard for the stock to continue rising from here. His downgrade was from TOP PICK down to Outperform, which still isn't exactly a death sentence. Shares were down over 1% yesterday early on, but managed to close up $0.11 at $98.66 in such a strong market.
On Friday I noted how Research in Motion was one of the ten or so major "Windows Dressing" beneficiaries where fund managers and investment advisors want to show the stock in their holdings at the end of a quarter. These performed unbelievably well and RIM along with them, showing a 50% quarterly gain, to the point you'd never know we were all worried in August.
Yesterday's earnings out of Palm Inc. (NASDAQ: PALM) have been taking a bit of a toll on PDA and smartphone stocks today, but arguably Palm's results were all in all "less bad" than they could have been. I became more concerned in September after noting a significant change among sales reps and mobile professionals inside Cisco Systems (NASDAQ: CSCO). They were able to finally choose from several PDA smartphones rather than just the Palm Treo that had been exclusive since 2005. RIM's rival is struggling.
Hewlett-Packard's (NYSE: HPQ) entry into a small segment of the smartphone market is not anticipated to be a major threat. RIM has even managed to show incredibly strong numbers during the Apple Inc. (NASDAQ: AAPL) iPhone hype, mainly since business users are BlackBerry addicts, hence its CrackBerry nickname.
Jim Cramer has RIM as one of his "New Four Horsemen of Tech" but even he said last week that RIM and the others need a breather and a pullback. He also noted, however, that any pullback would merely be a pullback and it would be off to the races again for the fourth quarter.
This is what happens when certain tech stocks get overvalued after a major run. Value is all relative, particularly among major growth stocks that everyone wants to own. This stock needs a breather, even if it is ultimately heading higher. The sales and units shipped for the company are just too strong for analysts and traders not to chase this one higher on any serious pullbacks. The wrath may be starting now, but even with current valuations it is hard to imagine that the trend won't head higher after the pullback shakes itself out.
Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.
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Reader Comments (Page 1 of 1)
10-05-2007 @ 9:50PM
charanischiu said...
If people say BlackBerry is the mobile phone for business people, they are all wrong.
I had tried many different type of mobile phone that run Microsoft Internet Explorer browser software, and NONE of them are capable to enter the banking internet system. Which means that no one can operate their banking account without a full size computer.
Until yesterday I got my iToucn, we do not have iPhone yet in Hong Kong. I started my iTouch and run the Safari internet browser through WiFi inside a shopping mall. I immediately enter my banking account and started buying and selling stocks either locally in Hong Kong or oversea in USA through my investment account in real time.
That was just a big huge surprise to me, since I was guesting before I have my iTouch whether this simple machine with internet browser can do. With the proof of the full version of Safari, not to mention the coming new Leopard, that can certainly make both iTouch and the more functional iPhone a fantastic machine for financing and business people.
Everybody who now own an iTouch or iPhone can easily enter their banking account and operate them in real time any where around the world with APPLE develop Safari or the new Leopard internet browser software. None of the Microsoft Internet explorer either version 5 or 6 can do.