Buy Research In Motion Now and Watch It Very Closely
Lennox is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Research In Motion (NASDAQ: BBRY) is currently shrouded in bullishness. The Waterloo, Ontario-based handset maker is making front-page news in most big media outlets amid what I could describe as “profound bullishness.”
Just as a recap, Research In Motion’s shares surged 10 percent at the onset of the week, hitting highs of up to $14.94. The surge on Monday cements the greater 14 percent rally on Friday last week and further adds to the protracted gain in Research In Motion’s stock value, which has more than doubled since September last year. Most analysts are tracing this bullishness to the Blackberry 10 launch and the subsequent ripples that this flagship smartphone will send down the market.
Despite this positive outlook, one question however remains unanswered; Even if investors buy in numbers, when should they sell? Better yet, at what point will they maximize their returns? Although it is difficult to determine a decisive selling point, it is possible- using prevalent conditions- to map out the likely course of events that will define Research in Motion’s stock in the foreseeable future.
Patterned behavior suggests that the groundwork has been properly laid
Before looking at how the Blackberry 10 will pan out, it is important to work all the angles. Looking at Research In Motion’s actions over the past several months, I believe that the tech big wig has sufficiently laid the groundwork prior to the highly anticipated Blackberry 10 launch.
In October last year, Research in Motion CIO, Robin Bienafait, reached out to unhappy enterprise Blackberry users, reassuring them of notable improvements in the BB10. The CIO, who was addressing a MobileCon trade show at the time, reiterated the frustration that many enterprise customers had toward the Blackberry Smartphone and the Blackberry Enterprise Servers. At her October address, Bienafait revealed that she had spoken to 180 CIOs since April last year. All of the 180 CIOs were Research In Motion customers. In addition, the CIO noted that the slow roll out of new smartphones, including the BB7, was partly traceable to poor carrier support.
In light of Bienafait’s remarks and efforts, Research In Motion has done a lot to ensure that it wins back its enterprise market and that the Blackberry 10 averts the path of the BB7. As of this writing, most big U.S carriers have thrown their weight behind the Blackberry 10 and as such, the roll out of the BB10 should go on in a frictionless fashion. In addition, Research In Motion offered its BB10 devices and software to more than 120 select government and enterprise customers in December last year- a month before the official launch date. This move not only allowed these select customers- who incidentally happen to be deep pocketed- to test the device and software prior to the launch, but it also allowed them to get a good feel of the device. From my point of view, I am inclined to believe that most of Research In Motion’s priority customers will easily adapt to the BB10 following this move. This is a huge plus as Research In Motion is certain of a specific niche in the market.
In the latest twist of events, this past weekend to be specific, Research In Motion also offered a $100 incentive to app developers in two alternate events that saw the Blackberry 10 bag 15000 apps in less than two days. By increasing its app offering, I believe BB10 will be able to pierce through the Google’s Android market. The dominance surrounding Google’s Android is mostly traceable to the large number of apps available on the platform.
Also, the focus on apps and software for enterprise, will help cushion Research In Motion in case demand for the BB10 tapers off at an undesirable time. Studies show that shipments for feature phones has reduced from 1Q 2007 all through to 3Q 2012.
The chart offers deeper insight
As shown, feature phones shipments are slowly, but progressively, losing demand to other regular smartphones. As such, something extra- like Research In Motion’s extensive software package- is essential.
BB10 will boost the share price: but for how long?
The insight provided suggests that BB10 will make significant inroads into the market and subsequently push Research In Motion’s share price. Nonetheless, for how long will the share price ascend? There are various ways to look at this.
For starters, we can use Apple (NASDAQ: AAPL) as an example. When the iPhone craze grasped the market, the only way that Apple could go was up. Its value increased in an unprecedented fashion and analysts everywhere aired bullish remarks, most notably Pro-Apple analyst Brian White, who made headlines after he pegged a price target of $1111 in August last year. As of now, saying Apple’s situation is bearish passes by as sugarcoating. Apple (at the time of writing) is trading below its highly coveted $500 benchmark. Demand for the iPhone 5 also seems to be thinning as reports from Japanese media houses say that orders for iPhone 5 screens have reduced. As of now, analysts who in the past increased their targets with assurance that the price will continue trending upward, have scattered. A few analysts like R.W Baird’s Will Power are the few who still have a positive outlook on Apple.
What’s the correlation between Apple’s case and Research In Motion’s case? Like Apple, before its recent bearish stretch, Research In Motion’s only direction now is up. It had hit rock bottom and right now, even a slight gain, will be considered an improvement. As shown by the IDC, Research in Motion lost 34.7 percent of its market share, year-over-year, in the third quarter of 2012. As of the third quarter, it controlled only 4.3 percent of the market.
With this small market share, the BB10, whether welcomed with hype or a muted response, will definitely help restore some market share. This will mean an inevitable increase in share price. From my point of view, the current hype around the BB10 will generate strong tailwinds for the device and it could as well be the proverbial silver bullet that saves this sinking ship.
Buy Research In Motion now and sell it immediately after the hype around the BB10 tapers off, don’t be like the Apple shareholder who was actually waiting for the price to go past $1000.
Yieke has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!