Research In Motion (NASDAQ: RIMM) enjoyed many years of mythical-type growth as a result of the innocuous little BlackBerry device that emerged on the scene around the turn of the century.
The thumb-driven mini-keyboard and its ability to access e-mail away from the computer allowed busy professionals to get more done, greatly improving productivity.
Unfortunately for the company, some of the biggest users of these devices were the Wall Street crowd. With the financial sector in complete disarray, investors in RIMM are legitimately asking if the loss of sales will be temporary, or something more permanent.
Shares of RIMM have been in a freefall during the latter half of this year. Since reaching a peak of nearly $150 per share in late June, RIMM lost more than $100 in value. Shares now trade in the mid-$30 range.
So what gives?
It is true that competition from Apple (NASDAQ: AAPL) and its iPhone may be part of the equation, but the bigger issue is the huge loss of jobs on Wall Street.
All of a sudden, sending multiple e-mails while slurping your soup may not be so necessary.
Another problem is forced liquidations from hedge funds. RIMM was a widely held momentum stock. With many investors needing to raise cash, RIMM was an easy asset to liquidate. Sometimes that's the way it goes.
But is RIMM a bargain at current prices?
From a valuation standpoint shares trade for 12 times trailing earnings and 9.5 times forward earnings. These are numbers for boring companies that don't exhibit any growth tendencies.
While it is true that RIMM is experiencing a trough in sales due to the economy, I would have to believe that the growth potential for the company remains intact under a typical expanding economy.
I would take a shot at the RIMM here.
My only real concern is competition with Apple. Ultimately I think there is room in the market for the BlackBerry and the iPhone to coexist.
Keep in mind that RIMM has a strong balance sheet and should be able to withstand this recession. Shares may fluctuate here at the bottom, but a strong recovery is likely in advance of the economy moving higher.
Jamie Dlugosch is a contributor to OptionsZone.com.
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Reader Comments (Page 1 of 1)
12-15-2008 @ 10:37PM
MayBug! said...
Well I think the BlackBerry Storm is just as good as the iPhone My Aunt has the iPhone and it is very cool but BlackBerry just got the Storm and it is very cool also. I think both Co. are fine even if the iPhone is not as big a deal Apple still has the iPods witch I am getting the new one for Christmas and my mom has an iPod. I like both brands for diffrent reasons. The iPod and the Storm!
12-15-2008 @ 10:47PM
klayymann said...
What about the Health sector?? and Lawyers both big Blackberry lovers.
Iphone is a toy not a tool, email is still better on a blackberry, security is still better on a blackberry.
for every one iphone i see 9 blackberry's, have you seen the new bold?? it kicks ass!!! i cant keep my hands off it and it's my wife's.