I wrote a post this past week on Seeking Alpha about 2 Technology Companies That Are Struggling For Market Share. The two companies in question were Nokia (NOK) and Research in Motion (RIMM). I stated that RIMM’s earnings estimate of $7.50 a share was optimistic at best. There was no way that the company was going to hit those targets based on its falling market share and declining Blackberry sales. Research in Motion reported earnings today and the results were downright disappointing.
Research in Motion’s sales revenue came in at under $5 billion dollars. That is incredibly disappointing since Wall Street was looking for $5.4 billion dollars. The half a billion dollar revenue shortfall was not even the most disappointing part. Research in Motion lowered its earnings estimates to $5.25 from $7.50. That is a 30% drop over the previous forecast. Investors have abandoned ship and have given up on the stock. Research in Motion is down 21.5% today and now trades at $27 per share.
Readers of the blog know that I recommended investors buy shares last summer and suggested that they sell the stock last December when it was in the $60′s. The stock looked too pricey to me and a fall appeared likely.
Now that the stock has fallen off a cliff, what should investors do now?
I would sit on the sidelines for a few more days and wait for the stock price to settle. At $25 a share or below, I would be willing to take a chance on RIMM. I would not invest heavy but I would consider a 1/3 position just to see how things play out. There are still several positive attributes that the company has. The company still has $2 billion in cash and no debt. The Playbook is selling reasonably well and a new Blackberry phone is due out soon. The stock is no longer a high growth stock but at $20 a share it is not a bad value play.
I will be keeping an eye on Research in Motion to see how the stock behaves over the next week.