Research In Motion Pullback is an Opportunity

Monday, July 7, 2008
By Faisal Laljee

Research in Motion (RIMM), the maker of the popular Blackberry smartphone ran into some headwinds last month when it missed earnings estimated by a penny. That was enough to send the stock down 10% from a near high of $145. The market pull back further pushed the stock down all the way to $115 last week. RIMM might have missed earnings by a penny, but its earnings were far from shabby at 115% over last year. The company stated higher R&D costs and operating expenses both of which would help their business in the long run.

Many people compare RIMM to Nokia (NOK) – that RIMM is too expensive relative to the market share they have in wireless handsets. However, Nokia’s handsets tend to be cheaper, with lower margins, and Nokia does not have or charge their users for a proprietary network that delivers email instantaneously.

The Bold and Thunder are both new cutting edge phones that promise to take market share from the likes of Nokia, Motorola and Samsung. Both are slated for release sometime in Q3 of this year.

RIMM also seems to be growing overseas, specifically, China, where it recently partnered with the world largest mobile phone provider China Mobile (CHL). I believe this pull back is an opportunity to buy. The stock has shown resilience near its 200 day moving average in the past and is currently right above it. I recommend buying RIMM at current levels.

– Faisal Laljee
Full Disclosure: I own RIMM but my position can change anytime without notice

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