RIM: Proceed with Caution

Jul.10.09 | About: BlackBerry Ltd. (BBRY)

Since reporting earnings after the close on June 18, shares of Research in Motion, Ltd. (RIMM) have fallen, trading as low as $67.53 intraday on June 23 then rising notably on June 30 thanks to initiation of coverage by BMO Capital Markets. The financial services and research firm reportedly gave the tech stock an outperform rating and a price target of $100.00. But the stock slid over the succeeding five sessions and is up 2% today.

The June 18 report for RIM’s first fiscal quarter cited a 33% jump in earnings. RIM said it earned $643 million, or $1.12 a share, compared to earnings of $482.5 million, or 84 cents a share, for the same period the previous year. Revenue jumped 53% to $3.42 billion for the quarter. It was RIM’s forward looking guidance that pushed shares down; the company is expecting lower revenue and earnings in the coming quarter.

Shares of RIM are up nearly 80% year to date and if BMO’s projection is to prove accurate, investors who buy RIM at current prices would capitalize on an opportunity to achieve a 4O%+ gain. If you had been alert enough to have invested in RIM at the 52 week low of 35.05 achieved March 9, 2009 and if you were to continue to hold until the shares do reach $100.00 then you will have nearly tripled your investment.

These are already quite substantial returns. In spite of BMO's bullish outlook one must proceed with caution. With consumer confidence again on the decline as evidenced by last weeks Consumer Confidence Index reading of 49.3 versus a downwardly revised 54.8 in May, with stiff competition in the Smartphone market, with the aforementioned lower earnings expectations and despite the coming launch of the new Blackberry Tour Smartphone, you have to wonder whether RIM’s stock price will achieve such lofty heights anytime soon.

Disclosure: I own no shares of RIMM.