RIMM's BlackBerry service is offered by some 565 wireless carriers around the globe, a clear strength of its marketability.
Product refreshments likely to sustain customers' interest from both enterprise and consumer segments
Last month, RIMM introduced its new tablet offering called the PlayBook. The devise has a 7" screen, 1 GHz dual-core processor, dual cameras and supports Adobe Flash. I believe RIMM will make a positive inroad to the enterprise market with this device, although I am somewhat concerned with the screen size and the size of the keypad. The PlayBook – has been welcomed by sell-side analysts, but many outside Canada still don't think it is enough to drive the company's share price much higher amid fierce competition with rivals such as Apple (AAPL). However, I think, it is too early to come to a conclusion on PlayBook's impact on RIMM's share price.
What the analysts are saying about RIMM's stock price
Since RIMM is Canada based, analysts from Canada are more likely to be positive about the company's prospects. For instance, Royal Bank of Canada's Mike Abramsky, who has RIM as a Top Pick, confirmed his $90 target, as did CIBC's Todd Coupland, while BMO Capital's Tim Long stuck with his $92 target and Outperform rating.
US based analysts are less likely to be optimistic about RIMM as they feel Apple outclasses RIMM. Indeed, Goldman Sachs analyst Simona Jankowski, raised her earnings per share estimate through 2013, saying that the company is improving margins. However, she reiterated sell recommendation and $45 price target. Even more bearish is Susquehanna's Jeff Fidacaro, who maintains a negative rating and a target of just $37.50, as "we believe RIM's new product launches (PlayBook, Torch) do not address near-term share losses in the North American consumer smartphone market." Net on net, as you have read, analysts have a very divergent opinion on the stock.
Negative factors those are likely to weigh
Security related legal problems
In August, India's Ministry of Home Affairs announced that it is implementing RIMM's proposals for access by law enforcement agencies. The Indian government plans to study the proposal over the next sixty days to gauge its feasibility. While this is only a temporary reprieve, I believe it is a step in the right direction in working with the various governments that have issues with the ability to access RIMM's corporate e-mail.
Intense and increasing competition
RIMM is facing intense and increasing competition particularly from Apple, Nokia, HTC, and Samsung which have been aggressively launching products to increase their market share in the smartphones segment. Additionally, HP entered the smartphone market through its acquisition of Palm in July 2010. In addition, RIMM's competitors are also actively pursuing opportunities to introduce solutions that compete with its flagship email solution. For instance, in May 2010, 2009, Nokia and Microsoft jointly launched Microsoft Office Communicator Mobile, a component that shows smartphone users the availability of workplace colleagues and offers communications with them via e-mail, instant messaging or voice. Also, RIM may face competition from companies focused on providing middleware to facilitate end-to-end wireless messaging solutions, such as IBM, Microsoft, Notify Technology, Openwave Systems, and Seven Networks, among others.
When investing in RIMM's stock, one has to keep in mind that risk to investment as indicated by its beta of 1.98 is considerable. However, probability of the stock reaching its target price and then advancing further up to breach its current 52 week price is also significant. It all boils down to the diversification in your stock/asset portfolio to reap better risk adjusted rewards from investing in RIMM's stock.