Research in Motion (RIMM) has not had a major product release recently and may not want to. Two of RIM’s biggest competitors, Apple (AAPL) and Palm (PALM) released new smart phones within the last week, and even though there has been considerable buzz surrounding both releases their stocks have not fared especially well as a result. Palm released the Pre over the weekend and it sold very well, albeit amidst speculation that Palm purposely constrained supplies in order to create the appearance of overwhelming demand. The result has been the stock selling off 13% since the release through just 3 trading sessions.
The Pre was dubbed an “iPhone killer” and the hype surrounding that release prompted speculation that Apple would counterpunch at its highly anticipated developers conference. Sure enough the gang at Apple, sans Steve Jobs, released a new model phone the 3Gs, the “S” stands for speed because this phone is supposed to be able to browse the internet twice as fast as its predecessor. Since the announcement, the stock has floundered down about 3%, but of course we wont know how successful this model is until it is released and sales are tallied.
Lingering in the background, RIM continues its steady climb. The maker of Blackberry devices is going to let Apple and Palm duke it out for now, as RIM hopes that those two will split some market share and only have a minimal effect on its market share. Blackberry’s will likely continue to be the dominant player in the enterprise segment of the wireless business, as Blackberry’s are still the best mobile operations center for professionals. Shares have been on a tear recently more than doubling off of the lows just over three months ago, and shares now stand at nearly $83. It is for this reason that Goldman Sachs (GS) just upped its price target for RIMM shares from $85 to $96 as they reaffirmed their “buy” rating.
While, RIM may not be in the mainstream headlines right now, that doesn’t mean they are resting on their laurels. They are planning to release a touch screen phone with a slide out QWERT keyboard later this summer. Furthermore, the company announced the acquisition of Dash Navigation, Inc. on Tuesday, which will give RIM an in house GPS mapping software operation. This should position the company well to take on competition in this feature driven mobile device industry. Most of these high end new smart phones are offering some navigation features, and GPS maker Garmin (GRMN) has been developing its Nuviphone for quite some time now.
Goldman Sachs is not worried about the increased competition in the smart phone market, at least not in the six month time frame they give for their price targets. At Ockham, we look at things from a longer term perspective, and we have a Fairly Valued stance on RIMM currently. Its stock price has advanced very fast, and selling for about 21 times expected earnings it is hard to argue that it is undervalued. It is being priced to deliver significant growth, which is tough to expect with so many strong competitors invading their space. Research in Motion is a strong leader in its field and has performed well but the valuation is no longer attractive at these levels. However, if it does fall back into the mid $70s, we will become more interested from a value perspective.