Research in Motion Takes a Huge Downturn

It was another volatile week for Research in Motion Ltd (NASDAQ:RIMM) that ended on a down note.

RIM started the week with a research report on Tuesday by?Bernstein analyst Pierre Ferragu. In a report called,?”Too Good to Be True; Activist and Takeover Upside Risks Now Material,” Ferragu upgradedRIM’s stock from Underperform to Market Perform.

He cited?RIM’s large patent portfolio,?activist shareholders?with potential to spur corporate changes and a valuation of approximately $120 per user as reasons that the company could see some buyout chatter.?And while he did note some “positives,” Ferragu wrote that, “We do not recommend buying the stock.”

RIM saw its stock rally on Thursday from buyout speculation. This piqued option traders’ interest with an increased buying of RIM’s?December calls, which expired on Friday.

Before the market opened on Friday, RIM made the grim announcement with a press release, that it would take a $485 million pretax provision from its less than successful PlayBook tablet. The company updated its guidance and said that it would now forecast its third quarter revenue to be lower than its previously expected range of $5.3 billion to $5.6 billion. Earnings per share are expected to fall to the low to mid-point of the previous $1.20 to $1.40 guidance.

Looking ahead to the fourth quarter, RIM expects lower shipments to affect its outlook; its full-year earnings per share guidance of $5.25 to $6.00 will unlikely to be met.

The company will release its third quarter fiscal 2012 report on December 15.

Once the market opened, additional bad news followed the stock from analysts’ responses. Stuart Jeffrey from?Nomura (NYSE:NMR)?wrote that?RIM’s warning could be seen as evidence that there’s already trouble in paradise for their new phones, while Citigroup Inc.’s (NYSE:C)??Jim Suva?repeated?his Sell rating and cu! t RIM 217;s price target from $20 to $15.

On Friday, RIMM closed down 9.20% to $17.08, near its 52-week low of $16.76.

No comments:

Post a Comment