Research in Motion (RIMM) - No Party Today

Research in Motion (RIMM) was not participating in today's festivities - I am sort of blown away that analyst's words still carry this much weight but it looks like an analyst downgrade bit the company today. (or perhaps multiple comments out today) Each time you think all the bad news is already priced into a stock in the market of late, we always find out it is indeed not.

• Research In Motion (RIMM) shares dropped as much as 10 percent on Monday after a brokerage report said that retail sales trends for BlackBerry smartphones in North America and Western Europe have been "slightly disappointing". It also said risks to November-quarter results are building as the company is becoming more reliant on "aggressive and successful" launches of its BlackBerry Storm and BlackBerry Bold models in the United States. The Storm and Bold are not yet available in the United States, Faucette added.
• Faucette said sales of the BlackBerry Flip, the first clamshell model from RIM, have been particularly disappointing, with only one or two sold per store after having been on sale for a few days.
• The RIM's forecast for the current quarter now requires "stellar" sales of the Bold and the first touch-screen model, the Storm, in the U.S. in November, Faucette wrote. Neither model is yet on sale in the U.S.
• Morgan Keegan analyst Tavis McCourt lowered earnings forecast for the third quarter to 87 cents per share from 95 cents, and trimmed more long-range figures as well, based on the slowing global economy. Sales of Bold, he believes, will bear the brunt of lower corporate spending, but he is impressed with the technical specifications of the Storm, and raised his estimates for that model.
• "People are ratcheting back their expectations for earnings," said Peter Misek, analyst at Canaccord Adams. "It's a pretty direct relationship when you see consensus estimates come down."
• As well, early sales of the BlackBerry Pearl Flip have been tepid at best and sales execution problems in Canada and Britain are plaguing Curve and Bold sales, said Pacific Crest Securities.
• However, Paradigm analyst Barry Richards said it's too early to make any assessment of what will happen to RIM's results. "With the Bold, the Flip and the Storm all set to ramp in the back half of October and through November it is too early to make any assessment of the potential for Q3 or Q4 results," Richards wrote in a midday note.

This is my favorite line:

• In a research note, Morgan Keegan said it now expects RIM's revenue to grow 84% in 2009 and 56% in 2010. Previously, the firm had expected RIM to grow 92% in 2009 and 70% in 2010. (oh the horror of 84% growth rates - down from 92%) ;)

Not that fundamentals matter but on year ending February 2009 analysts model $3.59 in earnings - let's say things blow up and they can only do $3.20. At $54 its still a mid teens PE multiple for one of the two dominant communication franchises with "only" 80% growth rates slowing to "50%" in the future. In the longer run the law of large numbers will kick in, and RIMM will grow in the 20-25% time frame but even on that figure it's quite cheap for its franchise and moat. And we're not near the 20-25% growth rate years.

This once again speaks to the absolute domination of short term results on Wall Street. If any 90 day period is not up to snuff, the entire forest is set on fire. I still like the Apple franchise better but RIMM appears to be an excellent value at these prices; however uncertainty will remain a problem until all these launches go through and investors see the full effect on margins. The stock seems to be bottoming out near $50 on the heavy down days so we're near that level again after today's 8%+ down move.

Long Research in Motion, Apple in fund; no personal position