Three Things you should know since my last blog on RIMM.

Just wanted to give you an update on some items with regards to RIMM that has come to my attention since I wrote my last blog on RIMM, which I posted on Saturday.

1.  By coincidence, I picked equity research analyst Gus Papageorgiou at Scotia for disclosure of his earnings estimate for RIMM.  As I noted in my past blog Gus had RIMM losing $1.15 for fiscal 2013 (RIMM’s fiscal year end is the end of February) and making $0.86 for fiscal 2014.  Well this morning Gus revised his earnings estimate for RIMM.  Instead of estimating $0.86 for fiscal 2014, Gus has revised this estimate to $4.13!  Yes, this is correct, from $0.86 to $4.13!  This change is obviously a head turner and can explain why RIMM had such a big pop here in Canada yesterday.

Gus was already ahead of street consensus with his $0.86 estimate.  The street is still looking at a loss of ($0.48) for fiscal 2014 as of yesterday.  With this blowout estimate it will be interesting to see what happens with the other analysts’ estimates.

2.  Fun with math.  Based on last night’s Canadian close of $17.41, we can reverse the algebra and ask the question; “What would earnings have to be to have the model price equal to the closing price or $17.41? ”  We have this number.  Earnings would have to be $0.75.  So you can see the market over the last month with the substantial increase in RIMM’s stock price has already taken into account Gus’s previous earnings estimate of $0.86 for fiscal 2014.  If RIMM had earnings over $4, this would place our model price calculation above EBV+5 or $65.

3.  We do have Nokia’s model price chart in our database.

Model Price chart of Nokia OYJ

Nokia OYJ with weekly price bars, EBV Lines (colored lines) and model price (dashed line)

Nokia OYJ with weekly price bars, EBV Lines (colored lines) and model price (dashed line)

As you can see Nokia is already trading at EBV+1.  Now I realize Nokia currently has a phone and it’s selling in the marketplace where RIMM has yet to announce theirs.  However, at least this gives you a comparable turnaround story in the smartphone space.

Again, I’m not recommending RIMM to you as an investment!  This blog is about the math behind the valuation of equities.  It’s about connecting the dots of various pieces of information giving you a more complete picture of what public information means in terms of valuation.  We love doing the math, and maybe pointing you in the right direction.  RIMM’s substantial rise in valuation is happening for a reason, and hopefully through our model price work you can see why this increase is happening.

If you are making investments based on model price work, and want to talk about it to help others, this is why we have the comment section under our model price charts in Facebook.  I may not be able to give recommendations, but certainly others can help to provide a profitable outcome.

One response to “Three Things you should know since my last blog on RIMM.

  1. John Boyce January 22, 2013 at 9:46 pm

    man, I like and respect Gus but not sure how he can go from .86 to $4+ when the phone hasn’t even hit the market, he has big cahonnes to call that, also believe he came out and reduced his target on Apple from $760 to $600 which is pretty dramatic also. Part of the reason rim/t has run so hard was 1/3 of float was short, ouchhhhhhh

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s