While I hate to play on Wall Street cliches, there is often a bit of truth to them. And one in particular caught my mind with respect to Research in Motion (Nasdaq:RIMM) and its new BlackBerry 10 operating system: buy the rumor, sell the news.
Rumor has it that BB10 is a “game changer” and that it will singlehandedly bring RIMM back from the abyss and make it a relevant player in the smartphone war again. Optimism on BB10’s launch was enough to make the stock nearly triple from is late September lows.
To say there is a lot riding on this for RIMM would be an understatement. This is officially do or die. After years of product delays, RIMM has lost market share to Apple (Nasdaq:AAPL) and Google (Nasdaq:GOOG) Android, and they now have to compete with a resurgent Microsoft (Nasdaq: MSFT) for the third slot. Among smartphones, the BlackBerry now has a market share of just 1.6%. In Britain and Spain, two of RIMM’s larger markets, its market share has fallen to 7.9% and 3.4%, respectively.
It’s not going to be easy to get those users back given the lack of applications available, the high cost of the BB10 phones relative to cheaper Androids, and the trend among large companies to let their employees bring their own mobile device. Yes, even the enterprise market is at risk.
The first BlackBerry 10 devices are scheduled to hit the market on January 30. If sales fail to impress, look out.
Put RIMM on your watch list as a potential short. If you see any signs of weakness following the January 30 release, use that as your opportunity to strike. I would expect the price to fall back into a range of $8-10 by March.
As always, use a stop loss for risk management. I recommend something along the lines of 15% stop on this one, as I expect it to be volatile.
