New Stock Pick: Long Research in Motion (RIMM) & Short Monster WorldWide (MWW)

By: ispeculatornew
Date posted: 06.28.2010 (4:20 am) | Write a Comment  (5 Comments)

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Counter-trend is surely one way to describe this trade. On Friday, Research in Motion (RIMM) dropped nearly 11% after announcing revenues and projections that came slightly below projections. How bad are things for Research in Motion? Not that bad actually. Profits did increase 20% to $769 million. But the dips and analyst downgrades (8 of them on Friday) were mostly based on revenues. How bad are revenues? They increased from $3.42 billion a year ago to $4.24 billion in the last quarter. Analysts were expecting $4.32 billions. Just seems incredible that a miss of such a small magnitude generated a 11% loss for the stock.

RIMM is still the leader

While Research in Motion might not have the momentum that other players like Apple and Google (through Android) have, it is still the leader in commercial smartphones and unchallenged in that regard. Go to your city’s downtown area and you will see tons of Blackberry users. Ask them what are the odds that one year from now they will be using another type of phone and they will tell you the odds are very slim. Which they are.

Just take a look at Friday’s bloody action:

And now a chart almost as scary, the year-to-date chart:

Where is Research in Motion failing?

Obviously, if the stock has performed so badly, it is because all is not well. Research in Motion has spent a considerable amount of energy trying to gain regular personal consumers to add to its strong “corporate” consumer base. That is where it is struggling against Apple and Android powered phones. But that is not where most of RIMM’s revenues and profits come from and it’s easy to put too much emphasis on the consumer part of RIMM’s business.

And now the short side

It is not the first time this year that I go short on Monster WorldWide (MWW) and the first time was very successful. The stock continues to look overvalued compared with other internet players. The continued slowdown in US employment as well as pressure from more specialized job websites (such as those from Dice Holdings – DHX) is not helping Monster’s numbers.

You can see Monster’s less than impressive traffic stats according to Compete here:

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5 Comments

  1. Comment by The Financial Blogger — June 28, 2010 @ 9:41 am

    I just love RIM!
    I think that analysts are over estimating Apple’s capability to compete with the Blackberry.

    the iPhone is a toy, the Blackberry is a tool. there is a huge difference between both and they don’t target the same market.

    I’m pretty sure RIM will bounce back, as it did in the past!

  2. Comment by Matthew — June 28, 2010 @ 9:47 am

    I’m curious to know why you didn’t short APPL instead? do you think that both APPL and RIMM can go up at the same time?

  3. Comment by IS — June 28, 2010 @ 10:24 am

    @TFB – Agreed, they serve different purposes. I do expect Apple to continue selling more Iphones than Blackberry but there is still growth for RIMM…

    @Mathew – Wow, I would not dare shorting Apple. In fact I’m long and it’s one of the picks I like most right now. The company is taking over tablet pc’s and mobile phones, not too bad hey?

  4. […] New Stock Pick: Long Research in Motion (RIMM) & Short Monster WorldWide (MWW) […]

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