Free Annual Reports
The Upside From Blackberry's Beat Down
The opening headline from Research in Motion's (Nasdaq:RIMM) first quarter financial release summed up the state of its difficult position in the hyper-competitive mobile phone market. It stated that it "plans to streamline operations and accelerate new product introductions" as consumers rapidly shift to Apple (Nasdaq:AAPL) iPhones and those that run on Google's (Nasdaq:GOOG) Android operating system. Yet despite its current struggles, the low valuation leaves room for plenty of upside should management be able to turn around RIM's operations.
TUTORIAL: Top Stock-Picking Strategies
First Quarter Recap
Revenue fell 12% to $4.9 billion from the previous quarter but still rose a respectable 16% from last year's first quarter. The company shipped 13.2 million of its Blackberry devices and half a million Blackberry Playbook tablets to compete with Apple's popular iPad device.
Cost controls helped temper the bottom line decline as net income fell only 3.6% to $695 million, or $1.33 per diluted share. Operating cash flow was approximately $1 billion. Subtracting out $220 million in capex resulted in free cash flow of $780 million, or nearly $1.50 per diluted share.
Outlook
Management lowered its full-year earnings guidance to a range of $5.25 and $6 per diluted share. Analysts currently project annual sales growth of 17.50% and total sales just north of $23 billion.
Bottom Line
The quarter wasn't pretty as sales and earnings fell below analyst projections and management announced the delay of new product launches until "the very late part of August." This and the lower profit guidance resulted in a share price decline of more than 20% and a stock that hit its lows for the year. Sadly, the stock now trades for less than half its highest level over the past year.
The wild card is if the company can stem the drop off in sales and release a mix of smartphones that are better able to compete with the likes of Apple, as well as Android-based products from the likes of Motorola Mobility Holdings, Inc. (NYSE:MMI) and Samsung. If consumers respond to its upcoming product release, the shares will likely rebound sharply, which is what happened to Motorola's stock after it embraced the Android system. Otherwise, they will continue to struggle, which is what Nokia (NYSE:NOK) shareholders are facing as it also rushes to design and release smartphones that consumers find appealing.
At a forward P/E of less than 5, not much good news is needed for investors to see solid stock gains, but the stock will likely remain dead money until tangible signs of a sales turnaround emerge. (For related reading, also take a look at Buy When There's Blood In The Streets.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
First Quarter Recap
Revenue fell 12% to $4.9 billion from the previous quarter but still rose a respectable 16% from last year's first quarter. The company shipped 13.2 million of its Blackberry devices and half a million Blackberry Playbook tablets to compete with Apple's popular iPad device.
Cost controls helped temper the bottom line decline as net income fell only 3.6% to $695 million, or $1.33 per diluted share. Operating cash flow was approximately $1 billion. Subtracting out $220 million in capex resulted in free cash flow of $780 million, or nearly $1.50 per diluted share.
Outlook
Management lowered its full-year earnings guidance to a range of $5.25 and $6 per diluted share. Analysts currently project annual sales growth of 17.50% and total sales just north of $23 billion.
The quarter wasn't pretty as sales and earnings fell below analyst projections and management announced the delay of new product launches until "the very late part of August." This and the lower profit guidance resulted in a share price decline of more than 20% and a stock that hit its lows for the year. Sadly, the stock now trades for less than half its highest level over the past year.
The wild card is if the company can stem the drop off in sales and release a mix of smartphones that are better able to compete with the likes of Apple, as well as Android-based products from the likes of Motorola Mobility Holdings, Inc. (NYSE:MMI) and Samsung. If consumers respond to its upcoming product release, the shares will likely rebound sharply, which is what happened to Motorola's stock after it embraced the Android system. Otherwise, they will continue to struggle, which is what Nokia (NYSE:NOK) shareholders are facing as it also rushes to design and release smartphones that consumers find appealing.
At a forward P/E of less than 5, not much good news is needed for investors to see solid stock gains, but the stock will likely remain dead money until tangible signs of a sales turnaround emerge. (For related reading, also take a look at Buy When There's Blood In The Streets.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Ryan C. Fuhrmann
Ryan C. Fuhrmann, CFA, has a background in portfolio management, overseeing assets for high-net-worth individuals and covering a broad array of industries from a generalist perspective. An active student of investing, he focuses on communicating his ideas as an investment writer and learning from the financial community. Ryan is also actively involved with the CFA Institute. Feel free to visit his website at www.rationalanalyst.com.
Free Annual Reports
