Corporate warriors around the globe know that when it comes to getting down to smartphone business, there’s no device that enhances productivity better than the Research in Motion (NASDAQ: RIMM) BlackBerry. The iconic smartphone has been the gold standard when it comes to serious corporate communications, but now the company faces challenges to its business-tool supremacy from the likes of tech heavyweights Apple Inc. (NASDAQ: AAPL) and Google Inc. (NASDAQ: GOOG). And though RIMM remains the big dog on the smartphone block, that doesn’t mean investors should dial up RIMM shares. Here are five reasons to sell Research in Motion
Lukewarm RIM earnings. On June 24, the company reported fiscal first-quarter earnings of $1.38 per share, which was 4 cents per share above consensus estimates. And while the bottom line beat forecasts, the company’s revenue of $4.24 billion came in below the $4.35 billion Wall Street wanted to see. The quarter was widely viewed as a huge disappointment to traders, and the result was a near 10% sell off in the shares immediately following the tepid earnings release.
Piling on the Downgrades. For some analysts, the selling in RIMM shares wasn’t enough of a blow to the company. Research firm Baird downgraded the stock from “Outperform” to “Neutral” citing fewer product shipments in the quarter, and Credit Suisse really tuned down its price target on the shares, taking the stock from a high-flying $100 to just $75. Judging by the selling in the shares since the June report, the rest of Wall Street doesn’t feel too bullish on RIMM.
Our Smartphone Survey: According to the latest ChangeWave Alliance Research Network smartphone survey, there’s been a huge shift in consumer preferences when it comes to smartphone operating systems (OS). Here Research in Motion competitors such as the Apple iPhone and the Google Android are taking the market by storm. The June survey found that among those planning to buy a smart phone in the next 90 days, half prefer to have the Apple OS on their new phone. Moreover, there’s been a 10-fold increase from June 2009 and March 2010 among consumers who say they prefer Google’s Android OS. Research in Motion was the biggest loser in the survey, with its BlackBerry OS preference rating dropping to its lowest level ever. Clearly, consumers are backing away from BlackBerry, and that doesn’t bode well for the stock going forward.
No Research in Motion Love. Another important metric measured by the ChangeWave Alliance survey is satisfaction rating among existing customers. Here we see a clear momentum shift taking place in the smartphone market away from Research in Motion and toward Apple, HTC, Motorola (NYSE: MOT) and even Palm. The survey shows RIMM has fallen to sixth place among smartphone manufacturers in terms of customer satisfaction with their BlackBerry smartphone devices. Just 30% of those reported they were “very satisfied” with their device, while 73% of iPhone users reported they were “very satisfied” with their phone. Once again, a disturbing trend for RIMM shares.
RIMM Stock Technicals. Maybe the biggest reason to sell RIMM shares is the recent distaste the Street has for BlackBerry. The stock is down 17.5% year-to-date (as of July 23), while the major market averages are just about at breakeven. In the chart below you can see that while RIMM is well off its July lows, the stock still has a very long way to go just to make it back up to the 50- and 200-day moving averages. With all of that overhead supply and technical pressure confronting RIMM, look for the shares to continue disconnecting with investors.
As of this writing, Jim Woods did not own a position in any of the stocks named here.
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