RIM stock falls below book value
Posted Nov 2, 2011 05:46:09 PM.
This article is more than 5 years old.
It’s been a rough day on the markets for Research in Motion, with the company’s share price falling below its book value for the first time in nine years.
RIM shares closed the day down nearly 2 percent in New York at $18.91 per share and down about 2.4 percent on the TSX at $19.18 per share.
RIM last traded below book value in 2002, before it became profitable. Book value is essentially the value of all the company’s assets. According to data compiled by Bloomberg at the end of last quarter, RIM’s book value is $18.92 U.S. a share.
Saj Karim of Canaccord Wealth Management says the drop shows that investor confidence is waning as the company loses market share. “They are losing market share in the United States in terms of their smartphones. As we all know, the iPhone is really killing them,” he explains. “But, they are growing at 40, 50 and 60 percent in different areas of Asia.”
When it comes to solving the problem, Karim says he thinks RIM’s management needs a change of attitude. “For a long time since they created this product, they’ve had a virtual monopoly,” Karim says. “So that gives you that, I don’t want to say arrogant attitude, but that ultra-confidence.”
However, Karim doesn’t believe it’s time to give up on RIM stock, with the company expected to generate $4.50 to $5.50 a share in earnings for next year. He says the stock is probably a hold. “I don’t know if it’s a strong buy here, but it could be compelling in terms of a good buy if you believe in the BlackBerry.”
