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Rimm has a fundamental problem. On its best day it produces the third best tablet and 3 best smart phone. There's not a lot of profit in being 3rd best and easily they can be 4th or 5th best if the PB doesn't come off well and they don't drastically improve the BB devises and soon. To date their technology is always behind and always buggy. Hopefully they get it all fixed but if history is our guide they won't.One should understand that stock market is not a one way street. And my targets are really for the long term and not for short-term.
Stock prices can be driven by the perception of the market on company's initiatives.
If you really want to analyze the reasons for RIM stock to dip so much after their earnings release and want to see if the dip is justified, you should look at the details.
RIM did beat EPS estimation for Q4. It has given a lower guidance for the next quarter due to-->
1. Heavy investments RIM is making in marketing PlayBook and heavy investments in it's platform.
2. New phones won't be launched in the coming quarter.
But, RIM has given a significantly higher than street estimated guidance for the year going forward. The street has pretty much decided to ignore this.
Street is worried that RIM is making a huge investment on PlayBook and QNX and is worried that this strategy might fail. If PlayBook and QNX are going to fail, hammering of RIM stocks is justified.
But being a technology company, RIM can't stay competitive without investing in new products/technology and going aggressive in the market. RIM was a company which was very conservative in approach and this is the whole reason why RIM let many other companies go ahead in the high end smartphone market and RIM has been highly critisized for this. If RIM has decided to change from this approach and is ready to take risks for greater growth I think it's a good move and well worth the gamble.
So, there is always an other side to such a major technology initiative. If the gamble works and PlayBook and QNX become highly successful RIMM stock can see the great heights that I have mentioned.
My analysis pretty much makes assumption that PlayBook and QNX will be very successful initiatives for RIM. If the assumption goes wrong, my analysis will be wrong. Only time can answer if this assumption will come true or not. Street hammering RIMM stocks is not proof that this assumption is wrong.
One should do a fundamental analysis and take a call.
If you want to jump on the bandwagon, if you want to feel more secure by believing what the street believes will always be true, of course you know what to do
If one want to jump into the details, here are some interesting details from the earnings call of March 24th -->
Research In Motion Reports Year-End and Fourth Quarter Results for Fiscal 2011 - Seeking Alpha
RIM Expands Application Ecosystem for BlackBerry PlayBook - Seeking Alpha03-28-11 10:47 AM - Isn't the NASHDAQ a river in India?Ok, you think I am manipulating the market. Call it lack of understanding of stock market
Let me give you guys few facts.
Average volume of RIMM stocks on Nashdaq is around 10 million stocks per day, so the value of daily transaction is around $650 million per day. Most of these transactions are done by institutional investors, not by small investors like you and me.
Each and every financial institution has it's own financial analysts who will be giving buy and sell call everyday for most of the major tickers. So any day there will be huge number of people who would have put buy call and huge number of people who would have put sell call on RIMM stock.
A small and inconsequential person like me for the financial industry giving a buy call on a technology fan site which is frequented by few hundreds of geeks, 90% of whom don't have any idea of stock market experience is not going to manipulate the market in any way.
In any case, I have days of research behind my article to back up my claims. My article is going through review process on seekingalpha.com and will be published soon. I will post the link.03-28-11 03:42 PM
