The surprising rally in Research In Motion stock from its September
depths shows no signs of waning ahead of next month's crucial launch of
the company's BlackBerry 10 smartphones, and the stock could ring up
more gains if RIM delivers on a handful of telling metrics in its
quarterly report on Thursday.
At this stage, profit and revenue won't
matter much for RIM. The company will likely report a third straight
quarterly loss, reflecting declining monthly service fees, ebbing device
sales and other problems.
What investors want to see are
indications of momentum as the BB10 launch on January 30 approaches. The
new line is probably the company's last hope of reclaiming market share
lost to Apple's iPhone and devices powered by Google's Android
operating system.
"The biggest catalyst for the stock by far is a
successful BlackBerry 10 launch," said Morningstar analyst Brian
Colello. "The entire investment thesis hinges on BlackBerry 10 so that
is the key focus right now."
With focus on the launch, cash on
hand will indicate whether the Waterloo, Ontario-based company has the
funds it needs to market its new line effectively.
"I want to see
the cash balances retained so that they have lots of availability to
support the launch of BB10 in January and February," said National Bank
analyst Kris Thompson.
"They are going to need money to build
their inventory and to promote the new product on a global launch. It's
going to cost hundreds of millions of dollars, so it is pretty important
that they maintain that cash balance."
Despite a massive loss in
the last quarter, RIM added $100 million to reserves as it slashed costs
and cashed in on money it was owed, bringing the total to $2.3 billion.
As
a second point of interest, investors will size up any charges RIM
books in its fiscal third quarter for layoffs and other aspects of its
painful restructuring.
"If it is $100 million or $200 million to
finish off the restructuring, I think people probably would be OK with
that," said CIBC World Markets analyst Todd Coupland, who has a "sector
outperformer" rating on RIM's stock. "Anything beyond that probably is
going to be cause for some concern."
Metrics such as service revenue, shipments and subscriber numbers will likely merit attention as well.
The
company bucked analysts' expectations last quarter and expanded its
subscriber base to 80 million as gains in emerging markets partly offset
defections in North America.
"The biggest number is the number of
BlackBerry subscribers that they are able to still hold on to during
the transition," said Morningstar's Colello. "Investors would like to
see that customers are not heading for the exits right before this
transition.
Great expectations
Although RIM's stock is well
below the heady highs of 2008, the share price has doubled since
September 24, fueled by positive feedback on BB10 from developers and
telecom carriers, along with a slew of analyst rating and share-price
target upgrades.
Even such long-time RIM bears as Eric Jackson,
the founder of Ironfire Capital, believe the recent momentum in the
stock is unlikely to dissipate in a hurry.
Shares of RIM, hovering just above $6 in late September, closed on Friday at $14.04 on the Nasdaq.
"If
they can actually ship a somewhat decent number of units and increase
that subscriber base and keep their cash balance near flat quarter over
quarter, the stock's going to, I would say, pop even more," said
National Bank's Thompson, who has an "outperform" rating on RIM's shares
and a $15 price target.
Analysts also hope to learn more about
the BB10 devices. Pictures, video and specifications have leaked in
recent weeks, but investors hope RIM offers up more juicy details during
its quarterly conference call after the results are released.
Thompson
wants to know when shipments are going to be commercially available,
pointing out that January 30 is only the date for the global unveiling.
He is also eager to find out when RIM will start selling a device with a
traditional keyboard, as the initial model rolled-out will be a
touchscreen only.
"All we know is it's 'shortly after' the virtual
keyboard, but I am not really sure the dictionary defines what
'shortly' is, so we want to have some concrete timelines," he said.
© Thomson Reuters 2012
Is this the BlackBerry 10 L-Series smartphone?