Analysts are now starting to pick up concerns I had about Research In Motion (RIMM). I wrote about my concerns in my Research In Motion: Market Has the Valuations All Wrong article. What spurred the relief rally in Research In Motion was the expectation that its patent portfolio was undervalued and was a possible buyout target.
The recent downgrade by Peter Misek, Jefferies & Co. analyst further backs concerns I have had regarding Research In Motion's future prospects. Peter Misek downgraded Research In Motion to Underperform from Hold. The interesting thing is he upgraded the stock three weeks ago, and quickly changed his mind shortly after the launch of Research In Motion's latest devices.
Here are some concerns that Peter Misek has regarding Research In Motion:
- Misek said, "we believe sell-in of new BB OS 7 phones were ok due to carriers' lukewarm response, and sales trends for older models continued to deteriorate."
- Misek expects RIMM to miss Q2 earnings $4.4 billion and 77 cents in EPS. This is about 10 cents less than expectations.
- Misek also expects a lackluster Q3 for RIMM as well. He's modeling $4.8 billion and 92 cents, compared to expectations of $5.23 billion and $1.36 per share.
I have to agree with Peter Misek and still remain bearish on Research In Motion. The concern I have with Research In Motion is it's out of touch with the client base it needs to attract. Research In Motion launched its Bold 9900 device at $300 after a $50 mail-in rebate, and that's with a two year contract. Current demand puts customer price limits at around $200 for a smartphone device. There is only one manufacturer that has had success with a launch price above $200, and that's Apple (AAPL).
I understand that Research In Motion has a strong international customer base but with Apple's plan to launch a lower priced Iphone, that could spell problems for Research In Motion. As the market starts to realize these issues, we should see further downside.
Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in RIMM over the next 72 hours.