RIMM at the Bottom

I have not found much to write about over the past week and I do not own a lot of equities in the PA at the moment, but I do own some RIMM at $17.50.  I am not a stranger when comes to writing about RIMM.  You can find my prior RIMM posts here, which can be summarized into three points: (i) the handset market sucks; (ii) RIMM is a product cycle disaster and (iii) the activists who want to break up the company lack any basic understanding of company’s technology.

I was looking at the RIMM chart today trying to figure out when to sell it.  I bought last week on Thursday just before the close because James Faucette of PacificCrest does not get positive on RIMM that often and his mid-day call made sense to me which was that RIMM was too cheap and trading at book value.  After the close Leon Cooperman’s Omega Advisors revealed they had purchased 1.43M shares of RIMM.  I am not certain if Cooperman called the bottom, but maybe he put a short term floor under the stock.  I was going to post daily and weekly charts on RIMM, but that is waste of time because the charts are beyond technical indicators.  About all I can get from the charts is that the 600MA is $36 on the weekly and the 20MA/50MA on the daily is $20.10/22.69.

Earnings estimates have a big spread $2.67-7.11 for the next fiscal with the mean at $4.77.  I think this number needs to come down to $3.50-4 and the average target price is $27.72 and this seems about correct to me.  I think the stock is fairly valued in the $24-27 range.  Here is what I do not believe in:

– RIMM is not a PE-Buyout target

– RIMM is not a M&A target (NOK/MSFT and MMI/GOOG deals killed that option)

– RIMM is not a breakup candidate (technology not separable)

– RIMM is not going to trade higher on some sort of IP monetization dream

If the leadership team wants to fix the company and get their currency higher they need to fix the product cycles, control expenses and stem share loss.  Note to the leadership team if the QNX device launch date is correct in this article, I sense a lack of urgency in the company.  2H 2012 is a long way off.

/wrk

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