So you’re thinking of buying RIM stock, eh?

Research In Motion
By Chris Umiastowski on 25 May 2012 11:37 am EDT
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Everyone knows RIM stock has been beat up lately. Completely FUBAR. It's to the point where I'm regularly fielding emails from folks asking me about it. And in Skyping with Kevin recently, he's seeing the exact same thing. So this post is all about the stock.

The first thing I want to make absolutely sure people (mostly newbies) understand is that RIM isn't "cheap" just because it trades at $10ish while Apple trades at over $500. People who don't understand stocks fall into this trap, so I'd like to prevent that from happening to CrackBerry readers.

Simply put, a stock is a piece of a company. Just like a slice of pizza is a piece of the whole pie. When you look at stocks, you have to consider how many stocks make up the whole company. The stock price alone is NEVER something you should look at, when comparing one stock against another. Never.

Now that we've got that out of the way let's talk about RIM. Thursday the stock dropped yet again to $10.71 on the NASDAQ. Again, the price means nothing on its own. So let's look at some useful metrics instead.

Market capitalization: There are 515 million shares of RIM outsanding. With each share just under eleven bucks that makes the whole company worth $5.52 billion. For perspective, Apple is worth 529 billion, almost 100x more than RIM. Nokia worth 10.17 billion or almost double RIM's value.

Don't read too much into these comparisons yet because market cap is still not even close to a full picture. I probably won't be able to give you a full picture in this article, but I'll do my best.

Price to Sales (P/S): If we take market capitalization and divide by annual sales, we get a price to sales ratio. This is more useful because it tell us how the market values each dollar of sales in a company. RIM trades at 0.3x while Apple is at 3.75x. So the market sees one dollar of Apple revenue worth well over 10x the value of one dollar of RIM's sales. What about Nokia? Their ratio is 0.22, so despite Nokia being worth more than RIM, the market thinks Nokia's sales are worth very little.

Now I hope you're starting to get a more clear picture of "cheap" versus "expensive". But we should still look at earnings, rather than simply revenue.

Price to Earnings (P/E): Forget revenue here ... let's look at profitability. How does the market value a dollar of profit from RIM? Well, its P/E ratio is 4.82. The higher the number, the more confidence the market has in a company's future prospects. And what about Apple? It's P/E is 13.8x, much higher than RIM. Clearly the market feels Apple's earnings are growing faster and are more stable than RIM's. And Nokia? You can't calculate their P/E based on the last 12 months. Earnings are negative. Companies that lose money have a market value based the hopes of future profitability.

Lots of other ways to look at stocks: The above discussion is very simplistic. We can get more complex by looking at trailing revenue and earnings versus forward projected earnings. You'd see that RIM's forward projected earnings are less than past earnings. That's a huge warning sign telling you they're struggling to tread water.

We should also be looking at the assets of a company (on its balance sheet). Apple has tons of cash, which artificially inflates its P/E ratio. So Apple isn't actually as "expensive" as it looks.

When a company is in trouble, analysts and investors start thinking about outcomes. Will the business recover? Or will it go bankrupt? Canadians worry that RIM is the next Nortel, but it's not a great comparison. Nortel was swamped with debt. RIM has no debt.

If the company can't recover on its own but isn't going bankrupt anytime soon, what happens? Do they get left for dead, slowly bleeding cash? Or do they get taken over by another player as a strategic investment? Do they get broken up for parts (patent value, infrastructure, etc)?

All of these potential outcomes (from A to Z) are possible for RIM. Obviously we hope the business recovers on the back of BlackBerry 10. But that won't happen until at least later this year, perhaps not until early 2013 once BB10 has a chance to start shipping in volume and catching on in key markets.

In the mean time, RIM is struggling, and faces a serious risk to its current profitability. And the stock seems to be not quite in free fall, but sinking lower steadily like a helium balloon a few days after the party ends.

How long can it go? Let's think about it's $5.5 billion market capitalization. They hold $1.7 billion in cash, and as of now they're still generating more cash every quarter. By next quarter perhaps we're closer to $2 billion in cash. That's 36% of the current stock price right there. But, if cash was the only backstop to the stock price it still leaves a TON of room for it to fall. And if profitability disappears in the next few quarters, while we wait for BlackBerry 10, the market will assume cash will dwindle.

Next up we've got other tangible assets. Buildings, real estate, and such. Forget the computers and other technology infrastructure. That stuff doesn't hold its value very long. But real estate does. RIM has about $1.5 billion in land and buildings on its balance sheet.

Finally, we have to include patents, which are intangible assets, but very important assets in an information business. RIM purchased a lot of questionable patents over the years, but most recently they spent $778 million on its portion of the Nortel patent purchase.

Adding up cash, real estate and the Nortel patents gives us almost to $4.3 billion, or about $8.30 per share. Could the stock drop this low? Yes, of course it could. Perhaps even lower, especially if profitability dried up between now and the BB10 launch. So if you're thinking of investing in RIM here you need to understand that it absolutely can drop much lower still. Never buy a stock when you don't understand the risks, and especially if you're not prepared to swallow the volatility. And most definitely don't buy a stock because somebody else told you to. If you buy RIM do it because YOU accept the risk and the responsibility of the decision.

Ok so with all of that said, what's my opinion? Not much has changed. It's close to being an all or none situation with BlackBerry 10. They either pull it together and prove that they can maintain a profitable business as a handset / platform vendor, or they don't. If they do, the current stock price will look like the biggest bargain of a lifetime.

But if they don't succeed they'll be forced to restructure into a much smaller niche player, possibly with a pure enterprise focus. They'll lay off a lot of people. They can probably be profitable, but much smaller. Restructuring costs money, eating up part of their balance sheet. The smaller size of the company and reduced cash balance might not be worth any more than the current stock price.

I don't want you to take this as a doom and gloom piece, because I was darn impressed with RIM at the latest BlackBerry World conference. I'm not selling my stock here. But I have lost plenty of money on it in the last year, and it wouldn't be responsible for me to sit here and write a piece telling regular investors to go buy the stock. Because you shouldn't unless you truly understand the risks and are willing to take 100% responsibility for your own financial decisions.

95 comments

vx1

Its still a good buy and hold stock :-) at 10$ a share I think its a buying opportunity, and here is why . Even if someone buys RIM the shares will go up, if they don't there is new good product coming out and the stock will go up.

br14

"Even if someone buys RIM the shares will go up, if they don't there is new good product coming out and the stock will go up"

Some fairly major assumptions there.

Not saying you're wrong, but RIM have released pretty decent product in the past (9900 is a great phone) and their price has fallen further.

As for buying RIM - that's not likely unless the stock completely collapses at which point the company may be troubled financially.

kb5zht

Its a good bargain buy ONLY if you feel rim will pull itself out of its slump and begin increasing sales and earnings again. Its not a given that it [i]would[/i] be bought by another company if the stock began to decline. It could actually fall below $1/share and become a penny stock. Right now the williams %R indicator shows it is still undergoing downpressure by investors (many more wanting to sell it than buy) and it's intraday shows it is in fact still trending down... Meaning, the stock is going to continue declining in price until a huge event reverses it.

gregorylkelly

"...until a huge event reverses it."

That's the main point here. That huge even will be a successful BB10 launch or there won't be a big event to save the company. The stock won't just start going up for no good reason. Sales figures and earnings will not improve until the launch of BB10. Until then, there is NO chance for RIM's stock price to recover. That being said, people who buy now MUST be in it for at least a year to make the risk worth it.

"It could actually fall below $1/share and become a penny stock"

I completely disagree with this statement. RIM has way to many important assets to become a Penny Stock. If they completely fail, someone out there will buy them or at least parts of them for their patents and other assets such as QNX and TAT.

cbvinh

I thought the minimum threshold was $1 too, until I read this from the SEC:

http://www.sec.gov/answers/penny.htm

Below $5 is all that it takes.

JakeTheCat

Good product coming out, competitors this, media that, short sellers, market share, price decline, price-to-whatever ratios, blah, blah, blah...

The only two questions that matter when buying a stock is WHAT IS THE COMPANY WORTH and WHAT AM I PAYING FOR IT? The first question inevitably relies on assumptions. The second question is easily determined and is a reflection of the stock market's assumptions. If you get those right you will do just fine provided you have a long enough time horizon.

Chris does a good job of outlining what some of the assets could be worth. That is a starting point. The next step is to determine what the future cash flows are worth. Where do they come from? How stable are they? How is the cash flow going to be used (acquisitions/research and development/dividends/share buy backs?) Will the future cash flow be used wisely?

Most of the babble you hear around RIM involve things that will determine the future of RIM but almost always fails to address what the company is actually WORTH. I hear too many people say that RIM's share price will fall because its prospects are... whatever. The opposite fallacy of course is to say that a company's share price will rise because its prospects are so good. That is a very simplistic way to go about investing and fails to consider a key question: how far will it rise/fall and why? If the answer considers the value of assets and future cash flows (adjusting for uncertainty) in a legitimate manner and can come up with a reasonable value (or range of values) as to what the company is worth then the argument could make sense; the assumptions should be weighed against your own.

If you can not conceive how any company could shrink in size - potentially all the way down to zero dollars in sales (I'm not saying that will happen to RIM, just conceivably with any company) - and still be worth more than the current share price (or even worth more than zero) then I would suggest you hold off on investing until you wrap your head around that. Countless companies have grown larger since the dot-com bubble while their shares languished. If you can not conceive of how a company could grow and yet have a declining share price... (Hint: Sometimes people pay more than they should. And if you can believe it, sometimes people sell for less than they should.)

Despite a good summary of the assets, the questions/assumptions Chris left unanswered with RIM are 1) Will those assets maintain their value? 2) What will the future cash flows be and how will they be used? and 3) How reasonable is it to assume the future cash flows will be used productively/squandered.

It would be great if Chris moved to the next step and did an article explaining the various ways RIM actually makes its money and spends it, and how those activities compare to other companies in the industry. Throw in a few assumptions that would explain the current share price and we can all take a look to see if those assumptions - and hence the share price - seem cheap, expensive, or reasonably priced.

Puz_zled

"It would be great if Chris moved to the next step and did an article explaining the various ways RIM actually makes its money and spends it, and how those activities compare to other companies in the industry. Throw in a few assumptions that would explain the current share price and we can all take a look to see if those assumptions - and hence the share price - seem cheap, expensive, or reasonably priced"

Great suggestion! I'd love to see that broken out by a professional, and not just my own amateur,thumbnail style analysis. Any chance Chris? Please??!!
Sent from the patio on my BlackBerry Playbook :)

crackcookie

I want to buy some stock, how do I do it, can someone PM me?

kingbernie06511

with no licensing deal or new 'competitive' hardware announced, no wonder stock is not recovering

Rootbrian

Emerging markets, fuck licensing, it won't happen, never will. Thorston made it clear.

johnmarki

Thanks for this Chris. As a wannabe trader the info here really puts everything into perspective for me. Honest and simple to understand.

kupfernigk

As a wannabe trader the book you need to read is "Where are all the Customers' Yachts?" by Fred Schwed Jr. It is still relevant today which is why it is still in print. Also, a good test is to read everything you can by Nassim Nicholas Taleb. If you don't understand it, don't bet on the stock market.

kingbernie06511

i.e. no new revenue streams

Rootbrian

RIM isn't licensing BBM out. Listen and listen closely: It won't happen. It's an Exclusive to BlackBerry. They aren't losing revenue, they're making it.

Trini-34

What a great read. You gave me more insight about how the stock market works (due to the fact I wanted to buy R.I.M's stock) I truly appreciate you hard work and time that you invested in putting this together. Also, after reading this I WILL be buying their stock!!

Great Job!

Let's Rock and Rolls This!

Puz_zled

Yeah stockwise it could get worse before it gets better. Separate your love for RIM as a company producing products we love to use from RIM the investment vehicle. Mike L always did!! I didn't work there, but I think I have this right: No one talks stock price good or bad unless they want to buy everyone ice-cream on Friday! Real developments-wise I think we're far past the low point and moving quickly up the other side to the next generation of mobile computing Blackberry style!!! and I look forward to using the products and profiting from the stock price movements simultaneously! There is a light at the end of the next two quarters!

jechow

From an investment perspective, I would wait to see how the market reacts to RIM's earnings announcement in Jume 2012. If RIM fails to meet consensus estimates and the stock drops then the market still does not believe the recovery is real. If the stock stays the same or rises then the market may be turning the corner and believes in a recovery. CB Fans, there is no reason to jump in early as there is lots of opportunity to make money on RIMM.

oldtimeBBaddict

Just a quick question. Does RIM list Company good will as an intangible? If so, where do they value it?

Also, the FIRST rule of investing is never invest more that you can afford to lose.

EDIT: They value their good will at only $304K. This is concerning to me, although I know it's an arbitrary value.

BiggerDummy

Per the WSJ RIMM reported $299M CAD of Net Goodwill under intangibles in the February 2012 Annual Report. Where did you find it reported as $304k?

The value of goodwill is arbitrary only in that RIMM would generally acquire a goodwill intangible through acquisitions and would have determined there is a value for it that they can justify carrying on their balance sheet.

There would have to be a pretty significant change to their accounting policy or assumptions for it to drop from $299M to $300k since February.

oldtimeBBaddict

Are you sure about that value? I just loooked at at their 3/2012 balance sheet and it showed $304K for good will.

Disregard that last question. I misread the the figures.

Paintedeyes

I hear RIM gonna be doing big layoffs starting next week so the public may get worried even more and the stock will probably lower again. I def plan on buying a more stock before bb10 comes out. I have faith!

gwinegarden

HP just laid off 27,000 people and their stock went up.

Never try to understand the market.

luancuvi

Massive layoffs used to make stocks price rise, as it was a sign of a company tidying their balance sheets up.
Besides, same revenues with less expenses equals more profits.
Anyway, sometimes it only shows a stormy future for the company and stocks go down, especially in the current turmoil.
I just try it harder and I use their logic, not mine.

skaber#CB

Where did you hear this? Any links?

bkupris

Great article, good read.

blackhawksfan75

"But if they don't succeed they'll be forced to restructure into a much smaller niche player, possibly with a pure enterprise focus"

This will be the worst case scenario and more than likely where RIM is headed. It also makes sense as being the top dogs in regards to security. To be quite honest as a regular consumer, BB's are already a tough sell unless that individual's main priority is a good keyboard.

BB10 won't be much different. I am rooting for RIM in hopes that their new device succeeds but the reality is, if the next iteration of iPhones comes before the BB10 or any type of delay it will be the icing on the cake.

Yasch22

So, Chris, you said you were SKYPING with Kevin on this issue??? You both have PlayBooks, right? Shouldn't you be VIDEO CHATTING instead?
Seriously, I use Video Chat whenvever I know someone else has a PB.
When I Skype, I get an awful lot of this weird buzzing feedback for some reason, and the video feed breaks up pretty regularly. All the problems disappear with VC.

playpen007

I have been accumulated RIMM stock almost every week now because I strongly believed that RIMM has a very bright future with BB10. I have accumulated about 4000 shares so far and my average price is around 14.5 dollars per share. I can wait 2 to 5 years.

jechow

I hope ur right. My position is not as large as yours but right now there is no institional support for the stock so it is going no where. There will be lots of opportunities especially if Greece gets kick out of the EU and the entire market exits high risk stocks like RIMM.

playpen007

If June 2012 quarter they still profitable and add more money into their cash account, the stock will goes up because June quarter is supposed to be their worse quarter. Buy the stock when everyone is hating but only if the company fundamentally strong and still profitable with no debts. If June quarter turn out to be ok quarter, I will buy some more shares. If you subtract their cash, Intellectual properties, lands based on Chris Umiastowski lowest estimated of $8.30 from yesterday closed price of $10.71 you only pay $2.41 per share. Since we still believed in their next software BB10, this is the best value stock.

csome2

i too have the same but @ 11 to 12

19cbb

You can accumulate and wait all you want, but is $RIMM gonna be there in 2-5 years?

Ask Chris if he wants to buy your 4K shares... bet he won't!

br14

At the moment you don't have to be mad to buy RIMM but it helps.

RIM's price has fallen even when the company reported decent numbers. Given that it's fallen from a high around $150, but is still a very viable company, I'd have thought anyone holding the stock isn't likely to sell unless they're desperate.

Given that assumption, and the volume of trading at key dates, the only reason I can see for the price drop is naked short selling. (I'd be interested to hear other hypotheses). Plenty of evidence from the unreasonable negativity around the stock from financial bloggers to suggest there's more going on here than just schadenfreude.

In which case, I wouldn't go near the stock right now because RIM could produce the best smartphone on earth and the price could still fall.

On the Goodwill question, I'm not sure of the answer but I do know Goodwill was revalued down significantly in the last financial statement. One of the reasons they made a loss on paper.

rim_investor

I'm in at $65/share...should say averaged down to that. Free fall happened after buying last 150 shares at around $42. I'm already down 90%, so my further downside is minimal. I would rather lose the final 10% than sell now. I've been burned holding Nortel and buying as it collapsed...won't do that again...although I may already have by buying in the $40s. Note Chris U. had Nortel as Action List Buy only a short time before they went bankrupt. I'm sure there are tons of shareholders with their average share price around my $65 level. I really do think Short Sellers knocked it down to where it is (e.g. Rocco Pendola). By the way, have you sold your shares Chris...or are you holding for a recovery?

Thunderbuck

In Chris' defense, Nortel's books were fraudulent, and we didn't get a clear picture of the company until after it declared bankruptcy.

I, too, held Nortel in its last couple of years of life.

lorax1284

I don't believe the hate on RIM has much to do with the market's view of BB10: I think a lot of investors are reacting to the "inevitability" of iOS / Android, which they feel will push BB into a smaller position than they have now. Anyone with a modicum of technical acumen can tell you that BB10 is a solid platform, and RIM knows how to make good devices. That's indisputable, in my opinion.

I believe that the "innovations" in Android and iOS are running out of steam, that RIM is well positioned to catch up and surpass them both in terms of innovation, leveraging their well-established infrastructure that Apple will be challenged to implement, and Google will implement in an ad-hoc vendor-agnostic way that I believe won't be as "rich" as the unified RIM approach.

I believe the market has it wrong on this. It has been 5 years since the iPhone launch. There are still defections from BB to iOS and Android, but most "western" i.e. Europe & North American BB users have had the chance to switch and lots have switched BACK to BlackBerry after trying iOS / Android.

I think all one need do is look at the Apple Mac to see the pattern here. The Mac remains a fringe player in computer operating systems, and Apple wants to grow that, but is it a fair statement that the Mac / desktop computing business unit of Apple LOSES MONEY hand over fist? They only have 4% market share... WHY DO THEY NOT THROW IN THE TOWEL????

Because there's money to be made, and they have a niche market. They suffer from the same "lack of apps" compared to Windows, but they do have some killer apps. RIM has those too, and will have more now that the developer experience has improved and with the NDK developers can directly access the hardware and even some of the RIM infrastructure that apps developed on other platforms can't even get close to.

The fundamentals are all there, and execution is going to make or break RIM in the next year or so.

I believe the consumer market WILL grow weary of iOS devices, I believe that Android is too much a dog's breakfast to tie up the market like iOS had early on, and that BB10 + RIM infrastructure will enable innovative developer opportunities and user experiences, so buying RIM stock is only a gamble in so far as I have to put trust in the current RIM executive to execute the BB10 launch and leverage all these very valuable RIM assets.

(I hold about 650 shares).

EDIT: "harder, and more often" sums up my opinion of iOS / Android "innovations" of late.

http://youtube.googleapis.com/apiplayer?video_id=SMBJqwdaWIU&&version=3&...

sickyute

Great article, gave me a lot of insight on how the market or stocks work.

Appreciate the effort you put into it (article).

BB10!

koool1

I have 200 shares - don't look anymore. Someday maybe I can cash out for a good profit.

sickyute

Off topic and because I just want to say it (lol). RIM needs to heavily integrate BBM in BB10

Yasch22

Chris, I'm surprised that your valuation of RIM's tangible assets (cash, real estate, patents) was so low. Regarding the patents, you chose the lowest possible cash value -- the money RIM paid for its share in the recent auction of Nortel patents. Fair enough that you should take the safest route here, but it wouldn't hurt to mention that the Nortel patents are only a fraction of RIM's patent portfolio, and the figures thrown around by analysts regarding the rest of the portfolio typically range from $3 billion to $10 billion.

Perhaps you could do a couple of follow-up articles. I'd recommend some further analysis, e.g., of the different between tangible book value and "regular" book value, where the value of some of the companies RIM has bought (especially QNX and Certicom) is taken into account. All in all though I agree with your conservative, keep-it-simple approach, especially if you're being asked by a lot of first-time investors what might happen if they take the plunge.

br14

"QNX and Certicom"

Not many draw attention to RIM's acquisitions, but the Certicom purchase alone has to be worth a significant amount in IP terms.

In the end though, the company is only worth what someone is willing to pay.

RIM is incredibly undervalued, and my guess is that the company hasn't been snapped up before now partly because no one really wants to sell, and partly because potential buyers know the price would rocket as soon as a bid became public.

rickda1

How and where can I buy rim stocks?

i want a tools not a toys.

Chinookman

If you need to ask you don't need to buy....you need to educate yourself first on the basics.....just saying..

_X_

Thanks Chris! Probably the best article I've read here at CB. Unbiased with good facts.

Back in 2006-2008 I made good money off of RIMM but seeing it's lack of vision and strategy has put me off. I like RIMM because of their strong brand, but until I see a real strategy I'm staying away from this stock.

Thunderbuck

It's probably safe to say that RIM's strategy is pretty much BB10. Period.

There's some potential upside on the enterprise device management side, but if the company is remaining intact, BB10 has to launch decently.

NaijaBerry

Very well written! If in my area i could purchase stocks i definitely would, one thing is for sure no matter what happens, if RIM can't turn things around themselves and a buy over is needed, they've got plenty of patents and other things under the hood that some major tech companies would love to have, blackberry/QNX is very far from either dull or dead. The question now is, what happens to your stocks in the case of an eventual buy over?

BB Fightclub

Can't talk about RIM stock without talking Short positions. A short position is where you borrow stock from people who are holding it and want it to go up, sell it at current price, collect your $$$, and then do everything you can to drive the price down because one day you have to buy that stock back and replace the stock that you borrowed.
As of May 15, 2012 NASDAQ 63.5 million shares short TSX 32.6 million shares short. All the instititions that are holding stock and fan boys like me are not going to borrow stock to sell, when I could just sell my stock. Of the 540? million shares out, half are held by institutions, a big chunk held by insiders, shareholders who have lost big time, and the true believers.
So at the first sign of good news, the shorts have to buy 100 million shares of RIM at market prices from people who don't want to sell. Could be dramatic. GO RIM GO

br14

"the shorts have to buy 100 million shares of RIM at market prices from people who don't want to sell"

Thing is if they don't already have those shares "borrowed", my understanding is they're breaking the law.

So who are all these people that are loaning out their shares?

abwan11

I posted this thread yesterday in the forums but didn't get a clear answers in regards to shorting of shares. From my understanding the shares being shorter are loaned out of long position accounts. In others words I'm long rim and my shares are loaned out to a client who shorts them and he makes money that I am losing.

I was talking with a friend about rims stock and how we believe it's being manipulated by pro short sellers (apple) ..anyway he explained that if you own rim shares in an account and you place a order to sell those shares at a price then those shares become unavailable to be shorted (loaned out). The idea is to place your order much higher then your break even point in case there is a surge in price so your not accidentally sold out.

If this is true then all crackberry community holders alone who are long rim share could have some effect.

Does anyone have any knowledge of this?

gimpy666

gimpy666
If your shares are not used as collateral for margin buying your broker in Canada has no right to use them for short sales. I trade with TD and they clearly state this.

Puz_zled

Most shareholders do not take physical possession of the share certificates. We are beneficial shareholders. The purchasing agent (bank brokerage for most of us) holds the physical certificates on our behalf and retain legal title to the shares! So they are free to loan them out to shortsellers for a small fee of course. If EVERYBODY chose to take possession of the physical share certificates short selling would cease to exist. But who wants to do that?
Sent from my BlackBerry Playbook

Im Mo Green

The cash balance will be somehing to look at in the quarter earnings. They need to grow that, if they show any measurable cash burn, it can get nasty pretty quickly. Hopefully they kitchen sinked last quarter,set expectations low to buy they some time. Hopefully some good news with regards to the Curve launch internationally. Fending off the droid attack., will help.

would also like to see them briefly mention app growth, should be over 100K combined. With BB10 apps growing at a nice clip. Also, give some color on when BB10 goes into carrier testing. Dont say too much, but keep the periodic updates coming.

tonyrenier

I bought 100 shares a couple of months ago at a little over 13.00. I knew I was in for the long run and not instant gratification.
I'm not thinking of being able to sell till at least Q3 of 2013 and that's OK.
I looked at all of the above and my only concern is price manipulation by the Brokers ala Overstock.com vs Goldman Sachs and Bank of America/Merrill Lynch.

http://www.rollingstone.com/politics/blogs/taibblog/accidentally-release...

tonyrenier

I bought 100 shares a couple of months ago at a little over 13.00. I knew I was in for the long run and not instant gratification.
I'm not thinking of being able to sell till at least Q3 of 2013 and that's OK.
I looked at all of the above and my only concern is price manipulation by the Brokers ala Overstock.com vs Goldman Sachs and Bank of America/Merrill Lynch.

Nick Shadow

Thanks for the clearly laid out, basic approach to a stock purchase. I would add that their is a big difference between owning this stock because you have faith in a recovery, don't need the cash for the next 2 to 5 years, and can afford the loss that may or may not result, versus trading it for short term gain.
At the risk of pointing out the obvious every transaction is a two sided trade, you bought from someone selling, you sell to someone buying, millions of times a day. Trading is a whole different animal, one should really think that one over.

From a trade standpoint, there are several things to consider before you get in, (on either side). These are some thoughts and not meant to be an all encompassing explanation of everything involved.
1. The short sellers basically own it now. Every time it moves up, they get in heavy and get out when they think it has collected a support point (rinse and repeat)
2. For some reason, no matter what RIM does, it is bad news, getting into that is a long, long, conversation, but it plays to the shorts, the longs get scared, shorts chew it up, So the media is an issue.
3. It will take solid and substantial news to move RIM progressively higher. The short sellers will need to feel some fear and start covering (purchasing the shares they sold, but didn't own).
4. That news (or fundamental change) w1ll need to be something that investors think is sustainable, or it just becomes another short opportunity as it reaches a resistance point.

Personally I think a lot of the shorts have gotten pretty complacent, they have been whipping this stock for ever, so they are thinking it is pretty much automatic. But regardless, they will continue to cap it, until something changes.

One example, new phones, BB10. The phones come out of the gate strong and things get moving, automatically up right? Well maybe, everyone knows there is tremendous pent up demand for this gear from the user base. So that sales spike is going to be watched very closely to see it they are taking share back, or just getting a sales bubble from the current users.

Just my humble opinion, yes I trade.

Nick

axllebeer

I think I'm about ready to get into the stock market and I think RIM is where I will start. The stock is low enough that with the launch of BB10 around the corner, it will either go up, or drop. But I'm banking on going up and it can't get low enough that it will bother me at this point.

It's time to invest in the RIMpire! We can go up from here! :)

Blackberry_boffin

Due to the irreversible, shambolic management of OS7, there is one thing RIM should be doing.
Managing the perception people have of the BlackBerry brand. This includes driving the message home that BB10 will indeed be a different animal.
Besides the hard work they are doing at HQ, and with developers, RIM should release a series of well timed and well aimed teaser videos pointing to the big relaunch for the ordinary consumers. These are the hardest to win back once they leave as they will be locked into long contracts on other platforms which have been repeatedly shown to enjoy better loyalty than BlackBerry. BB10 is not ready yet and will not be for a while but if it lands to little awareness then there is trouble afoot, nomatter how good it will be.

Chinookman

Good primer for fundamentals. Now look the technical. The EMA average is still showing a downward trend. The short term average has crossed over the long term and there is no reversal insight. For the person that said I'm buying on faith that is a very foolish reason to invest. Buying stock is about growing your personal wealth. There are a lot of tutorials about how to remove the emotion out of investments. I would highly recommend spending time on tutorials. Some good sources are seekingalpha.com and Investopedia.com. Good luck now get on the road to financial independence. The law of compounding interest is on your side if you start early.

gmsm

about stocks when are we going to have bloomberg for Playbook?

Thunderbuck

Intriguingly, as we discuss this AAPL is down 4%, and RIM is up about the same.

This is a marathon. Smartphones and tablets are both maturing markets, and there is still the potential to see different platforms each gain a constituency. There's news that Sony is not going to provide a promised upgrade to Ice Cream Sandwich for its top Experia phones, which only reinforces the notion that Android's fragmentation could be a problem in the long run.

As for Apple, security criticisms may yet limit BYOD for them.

RIM has a promising new platform that they're migrating to, and they seem to be doing everything right in the past six months. I agree with the notion that the stock could decline further, but I think there's a lot more potential upside than there is downside right now.

randall2580

There is a reason RIMM decided to stop giving forward guidance, they knew that until BB10 phones are at least tangible, the news was not going to be be good news and darned if that's not what we are seeing from reports like IDC where we can get reliable news.

When the phones are out and well received, you will have a better chance to buy the company IMHO. It's going to be a rocky road until we get there.

The few dollars you might miss not buying the low won't matter if the company is strong again.

abwan11

I thought rims cash position increased last quarter by 600m to 2.5 billion from 1.9 billion???

19cbb

Do yourself a favor and find yourself a good research report on $RIMM.

What were you expecting to read from a so-called analyst that keeps hyping the stock in a website ran by and dedicated to blackberry junkies?

One thing is to buy a phone and another is to invest your hard earned money in the company that makes it.

Stop misleading people!

Darlaten

I wouldn't have put things as harshly as you have, but I must admit, I am curious as to what formal qualifications/training Chris has in terms of economics/investments/financials, etc.

In any event, I would sincerely hope that no one is making their investment decisions based on one article from a fan site - RIM or any other company - that is a very unwise method of investing into the marketplace.

Disclaimer: Yes, I do own shares in RIM.

southlander

Since anyone here can validate or invalidate what he wrote using the same publicly available information he used, for what reasons are his "qualifications" important?

It is just an opinion piece with some analysis. It's not mind control.

BBPandy

umm He basically told people NOT to invest.

Who got your panties in a twist?

Chris Umiastowski

19cbb I nominate you for reading comprehension problem of the year award. 

SWAT-ron2k11

This is what I belive, Simple: Investors are pulling out to avoid the futher stock drop after the Q2/Q3 announcments. Then after the stock will sky rocket after the BB10 launch. Investors know RIM is pulling tons of money so they can get back on top. So why not wait till it hits bottom then pull back in and watch the stock rise gradually in the next few years. *** all of course believing that BB10 will be a succesful launch which I believe will happen

csome2

i still believe in BB will come back at Q3 to Q4 bc of BB10. just u wait, i know BB stock wouldn't be high like last year at $40+ but i do see that they can jump up to $20+ if they keep pushing their BB10 platform, this will save them.

abwan11

Rim needs a catalyst to get things going. Any signs that the phone is ready to go, or someone taking a stake in rim then things will turn quickly. All the current metrics used will be thrown out the window for a new perspective. Rim needs to deliver that catalyst to shareholders and surprising the market would be the best way. They keep on giving analyst all the ammo and not firing back with results. It's killing shareholders and the company. This is what analyst mean by same old story.

HabsSuck

Chris you missed both Short and Long term investments, $900 million worth! That would add almost another $2 ps to your price so the stock is over $10.

Based on this simple crude analysis, RIM is valued at it's liquidation price not including any of its own intellectual property which even bearish Peter Misek valued at $2.5 billion or roughly $5 ps, now we are at $15 ps. Future sales of BB10 is not even in the analysis.
If you have the stomach for it, RIM is a buy at $11.

If anyone read the Q4 transcript, the CFO stated that he expected cash to remain at the same levels in the next quarter.

Chris Umiastowski

You're partially right. I missed the LT investments of 337 million. I thought the summary I looked at included them, but it didn't. My mistake. Add another 60-70 cents to the stock value to reflect this. 

stevepar

I bought 200 shares the Friday before BBWC @ $13.25, I thought that was a good buy at the time :-)

Chinookman

WOW simply to much emotional trading going on here and can't help but want to holler STOP...!!!

Read this first: http://tinyurl.com/7eshd6y

Study and learn...I know I know in this day and age everyone is an internet genius with google.... nonetheless there are so many that have posted here that may very well lose their shirt on this deal. I have NOT read one single post with a sound reason of buying other then emotion and a big "I THINK" ...you are hurting yourselves but hey that is the free market at work also. I simply want to encourage all you young folks to quit jumping into the pool w/o knowing if you can swim or not just cause it looks like fun.

Ask yourself this.....has any company ever survived a 91% valuation loss???

Really, think about it RIMM was at one time 120+ per share only 4 years ago. For a sound company 4 years is no big deal but RIMM executives pissed away 4 years of opportunities and now they are at less then$11 bucks a share and no signs of slowing down the vortex spiral.

So this article has been a great conversational starter. But there is BIG difference between being an investor and being a product fanboy. The two cannot be combined and one still be successful.

Now go out there and read the link and take those free tutorials, they will pay off in dividends literally!

annon91221

I don't intend to buy any stock..ever..however...I follow stock as I follow sports, and I usually cheer for underdog..so coming back to your assertion of companies coming back from almost being written of...apple stock was @ 7.16 in dec 02...So I guess anyone who will inovate(play hard) will make a come back.

bbfan1040

It appears that RIMM is more likely to go up $11 than go down $11. However, don't listen to me - I bought high and sold low. However I just started reinvesting in RIMM based on long term BB10 success (hopefully)!

RIMM has made lots of mistakes!!!!! But I think they are making the right decisions. What other choices do they have?

One recent comment about HP was that they lost computer sales to competitors tablets.

Hopefully RIMM produces BB10 products faster than PB keyboards! Still waiting on mine.

Great, honest, factual article! Thanks Chris!

Superfly_FR

Personnal and maybe irrational. I will average my $15 50 shares with $10 (or so) 75 shares, I'm not over-investing (no threat for my familly) and hard believe in the big comeback. Guts invest, so it only my opinion, not an advice.

Please read carefully Chris article before considering joining the "game". Thanks Chris for all this light.

morganplus8

RIM has great value and has a once in a lifetime chance to come roaring back.

You get $ 2.1 billion in cash and equivalent, a strong patent portfolio and they grew Enterprise and Services by 12% last quarter. These are stellar achievements that the media neglected to mention.

Secondly, they wrote down handset inventory and this translates into another Q with increased subs, something that analysts are expecting to decline. How can so many would-be analysts miss this valuable information?

I own a very large block of the stock, I have also sold puts to acquire about 30% more shares this coming month. If that BB 10 phone is sexy, and retail consumers like the looks of it, the stock will double in no time. Apple has a predictable phone coming out and Android is a toothless OS for Samsung. It is time for RIM to make their move and finish strong in 2012. Management knows this and you can bet they are getting their ducks in a row now.

One Mobile Fusion contract with a major player and the stock will be much higher. Dirt cheap considering you already know the BB 10 OS is looking great here.

So let's review, Enterprise is screaming ahead, they will grow subs and handset sales will meet forecast for June 28th, not many are predicting such favourable news.

Perjade

Sounds like the "second coming of Jesus " ! Very good news !

WakyEggs

So in my vision:

Apart from the numbers... (how cares about them anyway, they are already incorperated in the stock price) I think you should look at the prospects.

And lets be honest: RIMM is competing with microsoft, apple and google in the phone business. Those are 3 very powerful and wealthy corperations, so IMO there is no way RIMM is gonna win that fight.

BB10 will not be a wonder, because take a look at the PB and see its failure (no skype, poor pdf reader, terrible browser stability etc.) and BB10 is nothing revolutionary compared to those other three os's.

I see it like this: At one point nokia is gonna release some sort of e71 phone with wp8, and that will be it for RIMM. People who want physical keys + trackpad will use that device and there just won't be anymore demand for a BB like phone.

IMO, the only thing that will make RIMM stock go up is anticipation of a takeover by another company, that has use for a phonemaker, but which company would that be?

Also I am no BB hater, (I use a 9780 and a PB and have no ios, android or wp device.) but RIMM's prospects are really really bad.. And chances of that turning around are very slim.

Also whatsapp is taking over the BBM people, so there goes the best unique selling point of BB devices.

Don't buy the stocks!

mandony

What RIMM is doing right?

Their long time international sales manager resigned this week; this is a good sign that a 'new blood' top manager likely will be installed.

The PB, slow in development, is demonstrating the QNX as a powerful OS; therefore, there will be fewer problems with BB10 phones on release.

BBphones currently do not have what the consumer want:
iPhones and Android are built with large touch screens. Consumers are using smartphones for internet browsing, going away from apps. Therefore, the demo BB10 shown at BBWorld Orlando seem to imply the new BB10's will first come out with the needed large (4"+) touch screens. For power text BB users, BB10's will likely also be available in smaller screens and hard KB's, much like the 9900's.

IMO, many investors want fast returns. Apple stocks were almost penny stocks a few years ago, then they came out with power products. Now their stock blossomed.
If you take the same positive view of RIMM, there will be another downturn in stock price, perhaps 10-15% before a slow improvement after release of BB10 phones. It will take another year after BB10 release before share price improvement.
If buying shares at 10% below current price, prepare not to incur substantial gains until late 2013.

kupfernigk

Actually, the iPhone does not have a large touch screen. By Android standards it actually has a small screen. Apple promote the "retina display" concept because, in terms of what can be shown on it, it is way behind the competition. In terms of what you can actually do with it that is useful, it is significantly behind the 9810 or the 9900. For business users, a keyboard is far more useful than Siri.

Yet it outsells the competition and is more profitable. Size is not the deal breaker. Nor is battery life.

I have a nasty suspicion that just about all phones are on the verge of being Good Enough. The next generation of iPhone may have a bigger display, but in any case it will be Good Enough that there won't be any compelling reason to replace one for years. The latest Samsungs are probably there already. The problem for a new entrant is that profit margins will be under a lot of pressure.

The PC market could only sustain two operating systems - Mac OS and Windows. There were a few niche products - special Unix machines - but they were very niche and expensive. It isn't clear to me why the situation will be any different with phones.

marcinz

Good read, love bb products and pb has been of the best purchases. Having said that there are much better stocks to put your money into. There's a chance that the stock could recover, but why risk it ?

Never chase stocks and don't make it an emotional decision, FB good example.

This market downturn is giving us a lot better deals to choose from.

dvider

RIM needs to start using their name in marketing when they release BB10. Something like "Blackberry by Research In Motion". they have a great name! Better than being a fruit!! It used to be considered one of the most innovative companies, I'm sure they will show their innovation colours again when BB10 is released! They just lost their way while Jim was busy doing the alpha male thing, Thorsten and Mike will put it back on track!

sheldonbk

Great general overview article. A follow-up piece on investor sentiment and how stocks can become extremely overbought and oversold would seem natural. Someone pointed out that there's too much emotional trading here and I have to put myself in that group. As much as I try to be logical and look at fundamentals and technicals like any other stock, I'm emotionally tied to RIM and never should have bought it. That's the error I and others made because when we're too emotional, we cloud our judgement and don't sell when we might otherwise have. There were very serious sell signals on the way down. I know that timing trades isn't a good thing to do in the long term but when major red flags go off that I would have sold any other position and I don't, that's when the emotion kills.

I should add that I'm still very optimistic on RIM but I would rather have sold when major red flags went off much higher and re-evaluate it here. It may be a buy here but my ability to deal with my RIM position without emotion is limited.

kupfernigk

Here is a thought.
Who said Facebook was overpriced? Geeks and nerds. Who thought HP and Nokia were toast? Geeks and nerds. When it comes to technology stocks, the bankers and the short term traders know nothing beyond what they hope to make on the flotation, or the effects of their latest pump & dump. To assess the long term prospects of RIM, read the technology press, product reviews and so on, not the WSJ.

Now here is a thought.

Last week in the Oracle/Google case the jury found almost entirely for Google. The critical decision now is on whether APIs can be copyrighted.

If the judge says they can, the result is going to be a litigation war that will seriously impact Android for at least a year or two, to the potential benefit of RIM. RIM has licensed Java; Google hasn't. If the judge comes up with the ruling that is expected by the IT community, the last real obstacle to Android just evaporated and, no matter how good BB 10 is (and I prefer everything I've seen to Android), RIM will be relegated to a minority enterprise player in the security area with expensive but relatively low spec products.

And a second thought:

Another important factor is the Windows 8 launch. If (as suspected) it sucks bovine excrement with a 3 inch sludge pump through a bilge pipe, RIM can breathe easy. If, contrary to the expectations for every alternate version of Windows, it is at least as good as Android, that is very bad news for BB 10.

The low RIM price may reflect normal market uncertainty, or it may have factored in a negative outcome for both of these events.

powellcrazy

I find it funny that author says that he 'skypes' Kevin, obviously this was not done on a RIM device. Wonder what device they really use every day

Branta

Something sitting on a desk with a big screen, full size keyboard and mains powered!

playpen007

I am not the stock expert but BB10 is very promising based on what they have showed so far. RIM still sale their Blackberry phones and making money not as much as Wall Street expectation but they still make money. As long as they still make money and not drain their cash account, I will take the risk to acquire more RIM share since I believed their BB10 will be good enough to compete with Iphone and Android phones. If you subtract their cash, IP and lands ($8.30 based on Chris estimated) from $11 closed of Friday, you only pay $2.70 per share. Since the company has 0 debt I think at least we get back $8.30 per share if the company stop selling their Blackberry Phones and give the company back to the shareholders. I think this is the best opportunity in the life time to invest in RIM if we still believe BB10 will be success.

DaSchwantz

>>The only two questions that matter when buying a stock is WHAT IS THE COMPANY WORTH and WHAT AM I PAYING FOR IT?<<

Bingo.

Except you've also got to add a third and fourth question. IS THE COMPANY LIKELY GOING TO BE WORTH AT LEAST AS MUCH AS IT IS NOW IN THE FUTURE? and CAN THE MARKET REMAIN IRRATIONAL LONGER THAN MY POSITION REMAINS SOLVENT?

That pretty well does it.

Oh and before you "invest", know that it is a rigged game. Fairfax / Prem Watsa has also gone to war with Wall Street, along with Overstock. That means RIM shares are a target of naked shorting, because Watsa is 5+% shareholder and on the board.

Google the following terms "Fairfax naked short lawsuit discovery", and you'll see what I mean.

jamie753

Great discussion! Being a BB smartphone user for several years and recently taken the jump from iPod/iPad devices to PlayBook, I've seen the light! I have been watching RIM for a while and after using their products and following this discussion, I believe the time may be right to own a few shares of a company which I believe produces some of the highest quality and functionality devices!
Appreciate all the discussion....

falconee

if the stock don't have to do with the fall of RIM in 2011 ! then why the stocks has dropped from 140 to 10 $ why the stocks can't be now for 200 $ for example ?? the stocks dropped when the company was falling !!