Research in Motion Bulls Sweating Bullets

Rumors of a negative earnings pre-announcement at Research in Motion (RIMM-NASDAQ) took the stock down to par earlier this week before it found its sea legs. The stock might mark time before RIM's September 25th earnings announcement, but RIM fans might be getting uncomfortable over a string of negative chatter concerning their upcoming product releases...will the Bold prove to be a dud?

RIM bulls are starting to trot out valuation arguments, which might be a stretch. Arguing the stock trades at a discount to its various growth rates might be true, but I am not willing to hang my hat on valuation just yet. I have argued the valuation highs were put in nearly a year ago, and multiple compression is slowly taking its toll on the stock. But it takes two to make a market, and some on the SellSide are keeping the faith:

Yesterday, Research In Motion (RIMM) announced that it will report its F2Q09 results (quarter ended August) on Thursday, September 25 after the close of the market with a conference call to follow at 5pm EST (dial-in: 416-640-1907). With rumors swirling earlier in the week that RIMM was set to negatively pre-announce results, we believe this release should allay any such fears. We note that RIMM shares have pulled back more than 20% during the past month due to concerns over the macro environment, product delays, expense discipline, and iPhone competition. Avian Research Note

While these concerns are valid and unlikely to be settled until we get F2Q09 results in two weeks, we point out that RIMM shares now trade at less than 28x our F2009 EPS estimate of $3.78 suggesting a PEG ratio of less than 0.4x (forecasted F2009 top-line growth of 80%). We view this valuation as attractive for a company on the front end of a robust product cycle with the launch of the Bold, Pearl Flip, touch-screen Storm/Thunder, and Javelin over the coming months.

To this point, RIMM shares rallied yesterday as the company officially introduced the new Blackberry Pearl Flip 8220. The 8220, which marks RIMM’s first foray into the clamshell form-factor, features WiFi capability and a 2.0MP camera. The 8220 will launch initially with T-Mobile in the U.S. and we expect Rogers in Canada as well, although specific timing and pricing was not provided. The device will be available in Red or Black colors. Looking forward, we expect the next product catalysts to be the launch of the Bold at AT&T in mid-September/early October and the introduction and launch of the Storm/Thunder in the October/November time-frame. We view risk-reward in RIMM shares as favorable at current levels.

Bill Fleckenstein went on the record last night, claiming on Fast Money that RIM was his favorite short. Bill is far from infallible, but if his thesis gains currency in Hedgistan the former market darling could find itself sledding uphill in the winter of 2009.

As we have recently seen with resource stocks , the transition from market darling to dog can take place rather abruptly.
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Stock holds $100 for now...

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