A few months ago I wrote an article call…
A few months ago I wrote an article called “49 app stocks that should go up huge and one that won’t” and the whole article was about how I thought Research-in-Motion was doomed despite being so seemingly well-positioned to benefit from the fastest growing sector in the history of business — the app/smartphone/tablet/cloud revolution. The 49 app stocks besides RIMM that I highlighted in the the App Revolution report are up some 25% in the last four months vs. the broader stock markets being up less than 10%. RIMM, not so much.
One of the reasons I thought RIMM was such a horrible stock back then was, as I put it at the time in the article, “I’ve been both long and short RIMM at various times over the years. Most recently we covered our very profitable RIMM short position in my newsletter’s model portfolio near $50 a share. RIMM’s trying to get seriously into the app game — and even the tablet computing game. I think they’re ill-equipped to continue to compete with Google’s Android phones and Apple’s iPhones — which are truly app platforms rather than converted email-platforms.”
A few months before that I wrote an article called “RIMM is dead; now what?”. In that one I wrote, “Forget about RIMM. Buy Google and stick with Apple. How’s that for being blunt?”
And for more detailed analysis, let’s turn to our RIMM analysis from the “50 Stocks for the App Revolution” report itself:
Company: RIMM – Research in Motion Limited Summary: Research in Motion manufactures and sells mobile devices, including smart phones. Although far behind Apple’s i-phone and Google’s Android, it too will have a share of Apps that will ultimately run on its phones. Balance Sheet Cash and Cash Equivalents: 1.5 B
Short Term Investments: 360 M
Long term Investments: 958 M
Total Cash: 2.8 B
Total Debt: —0
Net Cash: 2.8 B
Outstanding Shares: 522 M
Net Cash / Share: 5.4
Share Price: 58
Enterprise Value / Share: 52.6
Total Market Cap: 30.6 B
Enterprise Value: 27.8 B
2012 Sales Growth: 14.3%
2012 Earnings Estimate: 6.3
Enterprise Value Multiple: 8 Times Forward Earnings
Dividend & Yield: N/A
Apps and all things related to apps are in a huge growth cycle, and that while RIMM’s rightly been punished for losing market share in the smart phone market, especially in the US, it’s still going to show growth over the next few years — despite continuing to lose smart phone market share along the way.
The virtuous cycles that critical mass brings to a tech company, has recently ended for RIMM. RIMM had critical mass for the enterprise email solutions for a decade, but the technology has been creatively destructed by the very similar and more flexible (though still slightly less reliable) email/message/social-networking capabilities of the iPhone and Android…which, as I wrote yesterday, are just starting to see the virtuous cycles that come from critical mass.
How do you know when a company’s got critical mass, or for that matter, when they’re starting to get it or when they’re losing it? There’s not set formula, of course. You’ve got to watch the trends, the technologies, the companies, the consumers actions and where the developers are going.
So here we are today and RIMM’s crashed and getting crushed and people are asking me what I think of RIMM now. My answer? Forget about RIMM. Buy Google and stick with Apple. How’s that for being blunt?
