Why did I choose Research In Motion as my first post on this website? Well, it’s one of the biggest Canadian success stories from the last few years (I’m Canadian), I’m an investor in the company and it just announced earnings.

The stock is down to approximately $72, sinking 10% over the last three trading days. Most of the move lower was caused by a mediocre earnings report. Actually, the earnings beat estimates and the forecast pretty much met expectations. So what really caused the move lower? Remember that RIMM had a huge beat in earnings last quarter – the stock moved up about 25% after the results were released. Research In Motion has had a great run lately and I believe many investors piled into the stock recently hoping for another earnings blowout.


Obviously, RIMM is facing stiff competition. Apple’s iPhone is the sexy consumer choice. Palm is coming out with some impressive products and even HTC/Google will soon be stealing market share. That being said, the smart phone market is expanding rapidly and Research In Motion is still the 600 pound gorilla. The company’s co-CEO Jim Balsillie said “The line-up for the next 14, 15 months is spectacular … we’ve got sector winds at our sails.”

And I agree – RIMM should continue to see impressive revenue growth as it launches several new products over the coming year. The international smart phone market is ripe for the picking. Remember, RIMM was trading at almost $150 USD a year ago and has done nothing but continue to post impressive results. I can see this stock continuing to move higher throughout the summer and fall. In fact, I can see it reaching $125 by next spring. However, I’m a little weary of this stock in the long run (3-5 years). The mobile phone market has traditionally been plagued by profit margin erosion and although this hasn’t really shown up in RIMM’s results yet, it might in a year or two. My advice: take a serious look at Research In Motion at these lower levels. If you are or become an investor in this company, enjoy the ride, but consider taking some money (hopefully profits) off the table in the second quarter of 2010.

The Stock Guy’s Official Ranking: 9 out of 10