As Apple sinks, will RIM rise?

Apple was once the most valuable company in the world by market capitalization – a title lost to Exxon Mobil.

Perhaps too much attention is focused on Apple, but considering the remarkable decline in its stock price, we must note the Street was not impressed with Apple’s earnings results or the guidance provided for the future. It probably didn’t help that just before it’s results were released Netflix reported earnings that simply crushed analyst expectations.

Read: Apple no longer world’s most valuable company

Apple’s earnings are not a “nail in the coffin” for the company; however, the Street has less confidence in future results and strategic direction, which was clearly illustrated when the stock fell by over 10%.

Read: Record year for Apple app downloads

Question of the week

Should I buy Research in Motion?

Without a doubt there are many investors that thought this question would never be asked again as Apple and Android have been eating away at Research in Motion’s market share for a very long time. Many investors thought Research in Motion was dead and would never return to its former glory. While it’s true that the company may never regain its dominant market position, the claim that the company was dead may prove to be premature.

Six months ago, most of the discussion about RIM circled around break up, merger and acquisition, and intangible asset valuations. Six months later, much of that talk has disappeared and the market is clearly focused on the launch of the Blackberry 10.

We could write pages about the “scuttlebutt” on the Street concerning RIM, but when you think about the company’s valuation and thus its future, we think its success will depend on whether or not RIM can regain subscribers that left their Blackberrys over the past three or four years for other devices such as the Apple iPhone or the Samsung Galaxy.

Is this device truly a game changer in this industry that gives the consumer an experience not offered anywhere else? If you think so, then this company has all kinds of potential to regain lost market share, which could justify higher valuations. But if not, and the Blackberry 10 does not receive a warm reception, then the recent run up in price will likely be unjustified. We have heard conflicting views on the new device, so it’s difficult to say how easily RIM will attract new and former subscribers onto its platform.

Read: Lenovo hints at RIM takeover

As Canadians and consumers, we will hope for the best as it would be great to see a Canadian brand succeed once more, and it never hurts when consumers have choice. What we must make clear is that any investor considering RIM stock must realize that its price will likely remain volatile and trading this name is only for those investors with a high risk tolerance.

Gareth Watson is the Vice President, Investment Management & Research at Richardson GMP in Toronto. This team of research experts is responsible for monitoring and interpreting economic, geo-political situations, current market environments and trends. @Gareth_RGMP