My analysisAssuming RIM sales and profit errosion bottoms out in the second quarter 2012 (this next quarter), Then the forward P/E ratio with the stock price at $30 is around 5. Think about it, the only reason technology focused mutual funds, value investors etc would not be loaded up in the next few days would be if you assumed the $6 profit per year was at risk.
I agree with the earlier post that RIM is going through a soft patch in sales. One that they have not faced before. How mgmt addresses this business challenge will tell us much about RIM's ability to be relevant and competitive in an ever changing market. Apple is the cool kid on the block right now, but their CEO is on extended sick leave. I have more faith in Android going forward than Apple. Steve Jobs has a history of doing it his way and only his way. To date his way has been the right way. This was not true with the PC market in the 1990's and with MAC only controlling less than 10% of that space Apple could quickly be a one trick pony as well. Or, in a worst case scenario Steve Jobs is not longer with Apple, then what.
The non emotional side of my analysis is trying to determine if the $6 per share profit is the bottom. I think we could go as low as $4. Even at that profit level, the forward P/E on a $30 stock is 7.5.
So the key for RIM is to hit (or exceed) their profit and sales for the next quarter and rebuild confidence. If that happens then we will all look back at $30 per share and wish we had bought more.
The question for me is whether the large mutual funds and institutional investors have decided this is close to the bottom. If yes, I suspect you will see high volume sales at these price levels and then the price will stabilize.
From the emotional side the question is how low will the stock go in the next few days as people "bail" at all cost? If we see $25 as some have suggested I would think you should buy like there is not tomorrow.
To put it in perspective a P/E of 5 is way less than the most conservative banks and insurance companies in Canada. Manulife does not have profits, Sun Life has a PE of 10, National Bank is 11, and I don't see the business challenges for any of those companies less dire than for RIM.
I realize they are different companies in different sectors, but at some point fundamental analysis will kick in and the price will stabilize and go up. I thought it would be this past week, so I bought at $36. I was wrong on the timing but I still think I will profit from my $36 shares. The question is when.