RIMM stock analysis
Research in Motion Ltd. (stock ticker: RIMM) is a designer, manufacturer and marketer of wireless solutions for the worldwide mobile communications market. The BlackBerry wireless platform is its most powerful product.
RIMM announced last week that they plan to introduce a touch-screen version of its BlackBerry device in the third quarter, answering the challenge posed by the runaway popularity of the iPhone, made by Apple Inc. (AAPL).
The device, known as the Thunder, is to be sold exclusively through Verizon Wireless in the U.S. and Vodafone PLC (VOD) abroad, according to people familiar with the matter.
Verizon Wireless is a joint venture of Verizon Communications Inc. (VZ) and Vodafone. The device is designed to run on wireless networks in the U.S. and abroad, those people said.
This growth stock offers no cash dividend and has a high volatility risk, such as Apple and Google. At the moment, RIMM stock price is $130.71, not too far from its 52 week high:
The trend is bullish, with a minor correction between December 2007 and February 2008 due to the bearish moment Wall Street suffered.
On May 13, the prestigious financial firm Merrill Lynch, raised their estimates for RIMM to a price objective a year from now of $170.
Although the company has a high PE ratio of 61.4, RIMM´s growth opportunity will help sustain its longer-term momentum. Why?
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The company operates in a significantly underpenetrated smartphone market. Currently they only represent 12% of all cellphone shipments globally. We see no reason why this penetration cannot approach 35% in the next 2 years.
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They do not have the wide range of carrier relationships (Apple iPhone works only on GSM networks).
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RIM´s new brand campaign with new TV advertising should make the product more mainstream.
Many investors like to made the Apple versus RIMM comparisson. Although Apple is an excellent company, RIMM’s growth rate is twice us big, margins are better and there is more room for growing.
The risk to our price objective is that they are being formally investigated by the SEC (security and exchange comission) for stock options backdating. Also, RIMM has being sued in the past by NTP who obtained a settlement of $612 millions, and is being sued by Visto. Typically these cases run for several years before any decisions are made, so we expect no consequences in the short term.
We put a buy recommendation in Research in Motion (RIMM). Although in the short term market conditions could by unfavourable, in the medium term RIM should be a very good investment.
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Posted under US Stocks
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