Is the Market Over Reacting to RIM’s Short-Term Headwinds?

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Trefis
RIMM: Research In Motion logo
RIMM
Research In Motion

Research in Motion (NASDAQ:RIMM) has consistently lost market share in the U.S. smartphone market for the last few months. According to a recent report from Comscore, RIM’s U.S. market share declined from around 30% in January 2011 to 26% in April 2011. [1] The main beneficiaries have been smartphones based on Google’s (NASDAQ:GOOG) Android operating system and Apple’s (NASDAQ:AAPL) iPhone. RIM’s stock has sunk this year from around $58 at the beginning of 2011 to $38 as of today. Is market overreacting to RIM’s market share decline by punishing its stock? Our $68 price estimate for RIM stock is about 80% above market price.

RIM Isn’t Going Anywhere !

Although RIM has been losing market share in the smartphone segment in the past, it has consistently gained share in the mobile phone segment. RIM’s mobile phone market share has increased from 0.4% in 2005 to around 3.2% in 2010. We expect its market share to increase to around 3.7% in 2011 with the information that we have based on Q1 2011 data and the outlook provided by the company for the rest of 2011. Although forecasting long-term market share for RIM is difficult at this point due to uncertainty, we still expect it to continue to increase to around 6.7% by the end of Trefis forecast period.

We believe that the new features that RIM incorporated with the recent introduction of its BlackBerry 7 operating system and the upcoming smartphones based on QNX operating system in 2012 will give RIM the opportunity to increase its market share in the near to medium-term (see Can BlackBerry 7 Revive RIM’s Smartphone Push?).

BlackBerry Sales Growth

Here we have put up some numbers on how BlackBerry unit sales growth has trended in the past, and how it could trend in the future based on our estimates. You will find that BlackBerry’s units sales growth has been volatile in the past and has ranged between 40% to 110% if we analyze the data between 2005 and 2010.

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As shown above, going forward we expect the growth to continue to decline to around 12% by the end of Trefis forecast period. Is the market expecting an even more drastic growth decline than our estimate in the long term? Or is it overreacting to short term headwinds that RIM has found itself in?

See our complete analysis for RIM stock here

Notes:
  1. comScore Reports April 2011 U.S. Mobile Subscriber Market Share, June 3rd 2011 []