BlackBerry maker Research In Motion (RIMM) warned Wall Street yesterday that it would be spending a lot more money this quarter to keep growing, and investors aren’t thrilled with the surprise: Shares are down 11.6% today to $125.90. So AmTech analyst Rob Sanderson, one of RIM’s biggest fans, is out reminding investors today that this is a great time to buy — and that RIM’s meteoric growth is far from over.
“Investors hoping for a pull-back should not wait long,” Sanderson said in a note this morning, “This may be the best chance left this year to BUY weakness in the best growth story in large-cap tech.” He adds: “RIMM remains a must-own stock for growth managers. We strongly encourage investors take advantage of the pull-back to build or add to positions.” His argument:
- RIM’s Q2 revenue and subscriber growth forecasts came in strong.
- New products like the Bold, touchscreen Thunder, won’t make much of a difference until the November quarter, so they aren’t factored into the August quarter guidance RIM gave yesterday.
- RIM’s rare periods of heavy investment in the past have all paid back strongly.
- Operating margins should increase in the November quarter as revenue increases.
- RIM is the only company with more than a billion dollars in quarterly revenue that’s growing triple-digits year-over-year. (RIM’s Q1 revenue jumped 107% y/y.)
All fair points. We think RIM is underplaying — or worse, underestimating — how significant a competitor Apple’s (AAPL) iPhone 3G will be, especially among consumers, which are increasingly important to RIM. But we also think the smartphone industry is big enough and growing fast enough to support both of them — likely at the expense of Motorola (MOT), Palm (PALM), Nokia (NOK), etc.
Similar sentiment today from RBC’s Mike Abramsky: “With the smartphone market at inflection point and the company best positioned in history, RIM’s plans to materially increase investment are in our view a massively bullish signal, intended to achieve dominant global handset status and aimed at taking share from incumbent vendors.” Abramsky thinks the Q1 “investment surprise” could lead to an “upside surprise” in the November and February quarters.
RIM Spending Now To Keep Growth Going, Weak Q2 Guidance Will Send Stock Lower Thursday
BlackBerry ‘Bold’ Launch Delayed? Market Shrugs
Nokia Blindsided By iPhone, BlackBerry — No ‘Credible’ Answer