RIMM's Rocketship Ride
If you know any investors in Research in Motion , you may want to have some Kleenex ready; not for tears of sorrow, but for the ongoing nosebleed they're suffering with the Blackberry maker's shares trading at a 52-week high.
What a rocket ship ride these shares have been on: the mid-$60s last summer; over $148, intraday, today. The company is closing in on a $30 billion market cap, and pretty soon, we're talking (wirelessly, of course) of real money!
And the company was able to shake off a $250 million earnings restatement because of accounting irregularities that may have contributed to Jim Balsillie stepping aside as the company's chairman.
But that's all rear-view mirror stuff. What do the experts see through the windshield? RIMM is swiftly becoming the Apple of smart phones, even as Apple itself prepares to release a smart phone of its own. Blackberry should have enjoyed another robust quarter with an estimated 2 million units sold and the company signing up another million subscribers. All that momentum and the company is poised to kick it up a notch with a host of new offerings in the pipeline. Sure, the Pearl has been selling well, but there's a lot of Street speculation that the 8800 outsold it. This as the company prepares to release the new Daytona, the Cyclone and at least three other smart phone handsets.
"We have a $160 price target on (RIMM)," Pacific Crest's James Faucette. "If the momentum continues we definitely think there is room for us to raise that in the next 12 to 18 months. Expectations going into the report today are very high. We have to see how people digest the earnings report. But we think in the medium and long term, the stock is still quite attractive."
I can think of only Apple as a company that has seen such a meteoric share-price rise in such a short period of time as a company "still attractive" despite the gains it has already enjoyed. Google used to be a company like that but it's stuck-in-the-mud share-price really hasn't done all that much recently, at least not consistently. Pull a chart on RIMM and Apple and it's the kind of consistency "long" investors love to see.
"I think their subscriber growth will still continue to improve," Faucette continues. "We expect they added a million subscribers or better than that, and I think the May quarter will prove to be better than that."
The Thomson consensus today is 99 cents on $933 million in revenue. But there are some naysayers. Tavis McCourt at Morgan Keegan tells us this morning that he thinks RIMM still faces some competitive risks.
"There is a very short product cycle. RIMM clearly hit a home run with this generation of products, with the Pearl and the 8800, but every six to 12 months, you've got to come out with new products. And so do your competitors. So the game changes almost every year, and there are challenges and risks associated with that as they continue to innovate and stay one step ahead of the impending competition," says McCourt.
McCourt is way below the Street, looking for $934.2 million in revenue and 98 cents a share.
These are heady times for smart phone makers. Six months ago, Palm's Ed Colligan told me that his company was seeing a noticeable and dramatic shift among consumers here and in Europe toward smart phones. It's a trend every handset maker, including Motorola and Nokia , is trying to seize upon with a wide and varying degree of success. But those doldrums, says McCourt, may be short-lived: "One would expect over the next few years that would change and both those would become better competitors."
And all of this coming against a backdrop of more robust sales for the wireless world. iSuppli is out with a report today saying wireless subscribers in India will triple over the next five years, from around 150 million today to 484 million by 2011, making India the world's second biggest wireless market behind China. Growth is happening. And it's big. And not just here.
RIMM's numbers are key today. They'll tell every expert just how hot the fire is burning under the smart phone sector's growth. All indications are that the industry is more than merely healthy. And all indications so far suggest that the single company best positioned, with the broadest group of product offerings (both on the market and coming to store shelves soon) for both enterprise customers and consumers is RIMM. The trick for the company is convincing investors not just to stay in the company's shares at these levels; but convincing new investors that this stock still has a ways to go. The pressure on this company to perform today may be bigger today than ever before.
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