Research in Motion Rallying Ahead of Earnings

Research in Motion (RIMM) and Apple (APPL) seem to be dominating the handset space as both companies are at 52 week highs today while competing makers Nokia (NOK) and Motorola (MOT) are at new 52 week lows. RIMM is rallying prior to their earnings to be announced on June 25^th while Apple has a new iPhone ready to be released the second week of July.

Earnings

RIMM will announce their earnings on June 25^th after the close of the markets. They are expected to earn 85 cents on $2.3 billion in revenue. In the four most recent quarters the company has beaten or matched earnings expectations. Analysts have been slow to upgrade their expectations in the current quarter although they feel good about 2009 being a strong year for the Blackberry maker.

Options Indication

With the stock reaching a brand new 52 week high at $147.75 near the close of the day yesterday, RIMM looks like a stock that could knock the cover off their earnings. But there’s no sign of a big gap in the June options trading as much of the volume is near the stock price at 145 and 150 on both the Call and the Put side.

The Trade

You could buy the stock heading into the earnings and sell a day before and wait to see what the numbers come in at. This is a safe way to avoid a disappointment but still make a little on the expectation of a nice quarter. If the quarter does come in above expectations and the company is positive about the next upcoming quarters, you could buy back in for some additional appreciation.

Disclosure: none

Comments

[fatcat]

Steve,your trade would probably work in a normal market,but this market is anything but normal.Good article..

[Steve Patterson]

The June Options expire prior to the earnings.
The July options for yesterday trading appear to be strong on the Call side with heavy volume in 150 and 155 strike prices. With additional Call volume all the way up to 170.
The 130 Puts also saw 9900 contracts traded in addition to some high volume right around the current price with the 145 strikes.

[Jerry Dill]

I can see RIMM as a very profitable stock in the near future. I am still unsure about long term, however. I did like this article.

[Navivest]

In all likelihood, the company will beat earnings and traders should take some kind of position into the earnings. For those that trade options, enter into a straddle position. The move in the stock price should be great enough to make the position profitable.

[bryanz]

"Research in Motion (RIMM) and Apple (APPL) seem to be dominating the handset space as both companies are at 52 week highs today"

RIMM yes, AAPL no. AAPLs 52 week high is over 200. The stock is currently in the 180s.

I think RIMM might touch $150 going into earnings. If it does, I'll probably pare down my position some. I'm a little scared going into earnings this quarter. Especially with the Fed decision coming too.

[mkhanarian]

I agree that RIMM is slightly unpredictable into earnings, especially in this kind of market. While there is the possibility that the company misses earnings targets and pulls back, it is much more likely the earnings they announce meet or beat expectations. The strong global exposure and high profit margins explain why RIMM is a popular long for both individual investors as well as the professionals. Not only do the pros own @2-3 Billion worth of RIMM in their funds, but they have been increasing their exposure quarter over quarter. The link below shows how much the top hedge/mutual funds, have been increasing their position.

www.tickerspy.com/spy....