Hindsight Is 20/20, And As Luck Has It Our Foresight On Research in Motion Was Right On The Money Two Years Ago
Submitted by Reggie Middleton.
In the early spring of 2010, while trading at over $60 per share and still a darling of the street and corporate users, I warned that RIMM not only would not be able to compete with Android and iOS, but will be a phenomenal short. Well, two years later, while trading in the low teens the RIMM research is still pushing out profits. Research in Motion reported a minutes ago and…
- RESEARCH IN MOTION 4Q REV. $4.19B, EST. $4.51B
- RESEARCH IN MOTION 4Q ADJ. EPS 80C, EST. 81C
- RESEARCH IN MOTION SAYS BALSILLIE RESIGNS FROM BOARD
- RESEARCH IN MOTION SAYS JIM ROWAN TO LEAVE
- RIMM WONT’ GIVE QUANTIVE VIEWS DUE TO LONG TERM FOCUS
- RESEARCH IN MOTION REVIEWING STRATEGIC OPPORTUNITIES
BoomBustBlog banking and tech research has been quite prescient for 2010/2011. Subscribers who took advantage of this deserve kudos. To wit, and as excerpted fromAnother RIMM Job? It’s Amazing How Many Institutions Don’t Read The BoomBust!
Research in Motion has been one of the most successful tech shorts of this blog’s history (thus far). We first recommended a short last year and reiterated it in the fist quarter of this year. Reference:
- BoomBustBlog Research Performs a RIM Job!
- BoomBustBlog’s Fundamental/Forensic Analysis of Research in Motion Has Returned 2x-3x Original Investment This Year!!
This is a snapshot of RIMM as of the writing of this article…
As you can see, the results have been spectacular, particular if well timed puts have been put to use. In January I posted:
I personally see a clear leader in mobile computing becoming visible in 2012. Using options, a minimum of 2012 expiration OTM and ATM contracts can be purchase at the most optimistic break points demarcated by the model above after being populated with assumptions you feel most valid. I will have a proprietary BoomBustBlog option model available for download to paying subscribers by the end of next week, at which time we will revisit the analysis above.
A 50% drop in price later… On that note, Bloomberg reports: RIM to Cut 2,000 Jobs as BlackBerry Loses Share to IPhone
Page 5 of our Research in Motion forensic analysis (released in the summer of 2010 - RIMM Forensic Analysis and Valuation – Professional & Institutional or RIMM Forensic Analysis and Valuation – Retail) clearly stated that while we expected RIMM’s handset shipments to rise as a result of a rapidly expanding smartphone market, it will lose considerable market share….
As it turns out, it appears that we were erred slightly to the optimistic side with an 18% market share estimate for 2010. By the end of the 3rd quarter, RIM has fallen to 15.3% according to information calculated from IDC, and its decent has accelerated far faster than even we (the bears) have anticipated – a full 350 basis points for the quarter. This is 6x the decent of last quarter and 7 x the decent of the quarter before that. It is quite safe to assume that they will be materially below this point at year end (the data that we crunch is lagged by a quarter). This market share loss is most assuredly caused by the outsized growth of Android, which I will demonstrate in a minute. Below are charts generated from an updated version of the subscriber document Smartphone Market Model – Blog Download Version:
As you can see above, for the full year of 2010 RIM has trailed smartphone market penetration growth and that trail has increased each and every quarter with the rate of decent rapidly increasing.
RIM’s share price has benefited from an increasing equity market as well as the announcement of new products. The Torch, although possessive of redeeming new qualities, is essentially still a generation behind Apple and 1.5 generations behind Android. See RIM Smart Phone Market Share, RIP?…
Those that chose to follow this short recommendation had plenty of tools to assist in the decision making:
- RIMM Forensic Analysis and Valuation – Professional & Institutional: a 45 page analysis of RIMM, it’s strengths, weaknesses and prospects and probably the most thorough valuation that I know of concerning this company.
- RIMM Forensic Analysis and Valuation – Retail: a 10 page abridged version for my retail clients, containing all that you need to know including the market scenario valuation analysis (see Many More Black Eyes for the Blackberry? A Complete Forensic Analysis of Research in Motion for more information).
- Smartphone Market Model – Blog Download Version: the interactive smart phone market analysis and penetration model, includes data for HTC, Apple, Nokia and Research in Motion
- RIMM Multivariate Valuation Mode: the big Kahuna, for professional and institutional subscribers only. Please review the following overview of the model.
RIM Model Assumptions
RIM Model Factors Driving Growth
After populating the assumptions tab, jump to the “Factors Driving Growth” tab and choose the player whose market share and penetration data you want to populate the valuation model for the sake of comparison. The choices are “Nokia”, “RIMM”, “Apple”, “HTC” and “Others”. This tab is annual data only.
RIM Model Quarterly Factors (driving growth)
On the next tab, you can do the same as the previous (this tab is quarterly growth). Each of the growth tabs has charts that are print and presentation quality. Just be sure to tell everyone where you got thesis, data and analysis from .
Other tabs in the model…
RIM Model Income Statement
RIM Model Device Market Analysis
RIM Model Revenue Analysis
RIM Model Device Revenues
Valuation and Multivariate Scenario Output
Final output is RIMM’s valuation using our analytics and your assumptions as input in the assumption tab above, as well as a multivariate scenario analysis showing changes in quite a number of variables (assuming all others remain the same) and their effects on your base valuation, as well as the percentage upside/downside from the current price.
Additional RIM writings…