RIM Shakes Off a Needham Downgrade, For Now
iPhone fanboys were a-twitter today over analyst Charlie Wolf's downgrade of Research in Motion (RIMM-NASDAQ). The Needham & Co analyst pulled no punches; he thinks Apple is going to eat Research in Motion's (RIMM-NASDAQ) lunch:
Needham & Co. analyst Charlie Wolf expects the 3G iPhone to have a significant deleterious effect on consumer-handset sales at Research in Motion (RIMM, $109.00). Today he cut RIM to ‘Underperform’ from ‘Hold’ and chopped his 2009 EPS estimate to $4.80 from $6.25. Wolf says RIM’s fair value is $87 a share, 20% below the current price.
While RIM is about to launch an all-out offensive in the consumer space with several new handsets aimed at the consumer market—including the 3G Bold and touchscreen Thunder—Wolf says these will be ‘iPhone look-a-likes’ that don’t offer the same unique user experience.
At the same time, Wolf has a $240 price target on Apple (AAPL, $170.87). He sees the 3G iPhone driving Mac sales over the next several quarters thanks to everyone’s favorite ‘halo effect’ catch phrase. His fiscal 2009 EPS estimate of $6.95 is the highest out there—the consensus is $6.38. Tech Stock Radar
RIM shareholders were busy digesting news from yesterday's annual shareholder meeting. And Pacific Crest countered with their own note this morning claiming RIM sales are tracking ahead of plan at Verizon. Where is the stock going from here?
The financial blogosphere, which tilts heavily to Apple, was rife with chatter last week. primarily concerning predictions of multiple compression for RIM’s stock. Perhaps Henry is teaching his young charges valuation 101, but there was a time to question RIM’s valuation. It was called April, on the heels of the earnings release:
April 2nd
Expecting fireworks in the stock from here might be a tall order however. Net subscriber additions hit 2 million for the first time in a quarter, up 32%, but are not running quite at the levels seen in the fourth quarter, although the Pearl is more than holding its own.
The stock is trading a little over $121 afterhours, but we are beginning to temper our enthusiasm for the shares. It is hard to imagine much in the way of multiple expansion from current levels; my guess is that the stocks valuation peaked 6 months ago. Of course the stock should be able to outperform this pathetic tape with even gradual multiple compression, due to RIM’s remarkable earnings growth.
RIM has indeed outperformed a lousy tape since then, but the stock is down a few points, proving you can’t eat relative performance.
Still, I have been inching over to the Apple camp the past few weeks; persuasive arguments can be found if you can ignore the cheerleading. Technical/chart considerations might be keeping a lid on Apple’s shares; the 50-day moving average and a tough tape have been a strong headwind.
Hoping for an objective investment thesis from blogging MacTards at several high profile sites might be asking too much, at least until they spend a few years honing their analytical skills. Rounding out their skillsets, which in many cases has been limited to journalism and playing with computers in college, is a must. I cannot take them seriously as they trot out their stockpicking hats.
I will have more on this issue later; in the meantime I have to master proper English and the use of my spellchecker.
Charlie Wolf lost today’s battle, given RIM’s 487 basis point rise. His thesis has merit, but Charlie, and the bearish RIM bloggers, are telling us something we already know, given the recent price action.
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AAPL vs RIMM Two Month Chart
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Is Needham’s Charlie Wolf a Crazy Apple iFan?
Tech Stock Radar
RIM Turns Pearl into Gold
1440 Wall Street
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