Is Blackberry Tasty At These Levels?

There are fewer stocks out there that are more hated than Research in Motion RIMM, but if the company can manage to fulfill its promises to investors, then perhaps there will be more motion in the ocean, or at least up North. Shares have fallen from the mid $50's just a few months ago to the $35 level where they currently sit. Shares are higher today, as the company did receive an analyst upgrade, a very bold one. Shares have fallen sharply and are at a 52 week low on concerns of market share loss, in addition to uninspiring products. This morning though, Avian made a very bold call, upgrading the stock from Neutral to Positive, citing an attractive risk/reward entry point. The company has been losing market share left and right to Apple's AAPL iOS, as well as Google's GOOG Android operating system. The company ventured into the tablet space with its "Playbook", but sales have not been as brisk as some on the Street had hoped for, and is not doing anything to differentiate itself from other tablets on the market. The company is expected to report quarterly earnings of $1.32 per share on $5.15 billion in revenues. Last year, the company earned $1.38 per share on $4.24 billion in revenues. The revenue growth is there as evidenced by the sharp jump in year-over-year numbers, but the sex appeal and pizazz that Wall Street so craves just is not there right now. There is also healthy skepticism over whether the company will keep its $7.50 per share earnings target for this year. Shares are trading at around 5 times those earnings projections. Guidance for the next quarter is also crucial, as RIMM is expected to say it will earn $1.40 per share on $5.48 billion in revenues. Analysts expect Blackberry shipments of about 13.3 million units for the May quarter, with about 436,000 units of the company's newly launched Playbook tablet. On top of the healthy skepticism, just yesterday Dolby DLB filed patent-infringement lawsuits in the U.S. and Germany against RIM. So is RIMM a buy here? Even if Research in Motion were to take down its full year earnings forecast from $7.50 per share to around $5 per share, shares are still trading at an absurd valuation, 7 times earnings. Avian is definitely right with the risk/reward call here, but I am not sure if it is anything more than just a short term trade at this point. The Street has not been impressed by the execution from management, and the company's products are not impressive. These sentiments were echoed by J.P. Morgan analyst Rod Hall. “As we believe software is now the main basis for smartphone competition, we see execution problems as a significant risk,” wrote Hall on Tuesday. If the company to our North can break the ice and stop screwing up with its execution, then perhaps the stock is a buy at these levels for more than just a flip. If RIMM is able to deliver strong Blackberry shipments and keep its earnings forecast close to its original projections, then shareholders will be eating strawberries and cream. If not, then the sour grapes will continue.
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