Market Overview

Can BlackBerry 10 Reverse RIM's 16% Loss?

In yesterday's earnings preview for Research In Motion (NASDAQ: RIMM), Benzinga speculated that there would be more losses and fewer surprises for the BlackBerry maker. However, it was unclear just how low RIM would go.

As of this writing, RIM's shares have declined more than 16 percent. This is a quick reversal from the company's one-month gains of more than 37 percent. Over the last three months RIM rose by more than 118 percent. Now, with only one month before BlackBerry 10 is schedule to arrive, RIM is spiraling out of control.

"Santa delivered early Christmas for RIMM holders as the stock has rallied 90% in the past few months but investors were surprised during the earnings call that the company's highly profitable services were going to materially & structurally shift lower with the coming new BB10 products," Citigroup explained in a new report. "…As the earnings call progressed it became clear that RIMM is going to receive much lower rates on its highly profitable services (on the new BB10 products) causing the stock to drop 12% after hours. While this was a major focus for the Q&A during the call, RIMM was unable to quantify the risk."

Citigroup reiterated its Sell rating but raised its PT from $5 to $6, indicating that while analysts expect the stock to drop (RIM currently trades for around $12 a share), it may not drop as low as previously anticipated.

Bank of America Merrill Lynch raised its PT from $6 to $7 while reiterating its Underperform rating. BMO Capital Markets raised its PT from $8 to $12 but maintained its Market Perform rating.

RIM needs BlackBerry 10 devices to be successful in order to survive. The company has not released a major product since the PlayBook arrived in 2011. That device -- a small, seven-inch tablet that dared to be different by supporting Flash -- initially retailed for $499. For that same price, users could purchase a full-size tablet from Apple (NASDAQ: AAPL) or Hewlett-Packard (NYSE: HPQ). RIM quickly lowered the price of the PlayBook to $300. By the end of 2011 -- the year in which RIM lost more than 75 percent of its value -- many retailers sold the device for as low as $199.

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Posted-In: Analyst Color Earnings News Guidance Intraday Update Analyst Ratings Movers Tech Best of Benzinga

 

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