Readers of this space know that the investment bias is toward large-cap companies with demonstrated business models and who have a competitive advantage in established markets, preferably with a favorable, global trend as a support. However, every once in a while, and exception is made, and Research In Motion (NASDAQ: RIMM) is one.In general, analysts see a 20-35% increase in FY 2010 revenue, driven primarily by, of course, RIMM's wildly popular wireless smartphone, the BlackBerry, which supports global mobile voice and e-mail.
Further, RIMM's results so far during the recession do not appear to be hurt by the downturn in consumer electronics generally, and the decline in workforces across sectors. BlackBerry has a loyal following of users who "love their BlackBerry."
Originally the smartphone of choice of institutions (large corporations and government agencies), the '2B' has successfully penetrated the consumer market. Moreover, there's ample room for market share subscriber gains and for gains in the relatively un-mined software / services revenue stream. The First Call FY 2010/FY 2011 EPS estimates for RIMM are $3.90 to $4.65. Most analysts see average, annual EPS gains of 15% or better over the next three years.
The risks? Right now, the BlackBerry (mostly executives and business professionals) and Apple, Inc.'s (NASDAQ: AAPL) iPhone (mostly everybody else) represent distinct markets, but some features overlap. If the iPhone ever looses some weight/obtrusiveness, it might make inroads among executives and older professionals, but as of now, that remains 2B's territory.
Stock Analysis: Research In Motion is a moderate-risk stock. Consider buying a 25% position in RIMM now; then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your RIMM position in the first half of 2009. More-cautious investors may wish to wait under RIMM pulls-back to $72, but keep in mind that RIMM may not retreat to that level. Sell/Stop Loss if you were to buy shares in this company: $37.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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Reader Comments (Page 1 of 1)
5-07-2009 @ 1:28AM
Peter Epstein said...
RIM is a solid company, but they need to come out with a legitimate competitor for the iphone. As much as the blackberry is used by professionals, that market is becoming more and more saturated by the iphone. The storm was a very poor alternative that seemed to miss the objectives of the market.
Peter Epstein
http://www.thewebwar.com