Is the Rubber Back on the RIM? (RIMM)

What comes out of the oven when a downtrodden stock mixes with a pinch of good news? According to a Seeking Alpha article on Friday, some traders believe the recipe results in a potential takeover target.

On September 27, Research In Motion (NASDAQ:RIMM), the maker of Blackberry products, reported second quarter earnings that bested expectations by a penny. The company showed a loss of $0.45 for the quarter compared to a consensus of research analyst that projected a loss of $0.46. Even though revenues for the 2013 second quarter declined by 31% from the same period in the previous year, traders seemed relieved that the news was not any worse than expected.

Currently, 45 research analysts cover Research In Motion. The average recommendation rating on the stock is “underweight” with a price target of $8.00.

The author of the piece speculates that Microsoft (NASDAQ: MSFT) can acquire Research In Motion at current stock level prices plus a 100% premium. In the arena of mobile phone platforms, Microsoft finds itself in the third-place slot behind Apple (NASDAQ:AAPL) and Google (NASDAQ: GOOG) with Research In Motion eying to be number three. Microsoft can protect its flank with a hostile takeover play for Research In Motion.

Shares of Research In Motion have jumped over 16% from $7.14 to $8.30 since the company released its second quarter results. Traders in the stock started the morning a little sleepy from the weekend. After opening the first session of the week unchanged, share prices hit an intraday low of $8.10 within 30 minutes of the opening bell. However, before the first half-hour of the trading day had expired, buyers saw an opportunity to grab some shares and they drove the stock to $8.45, which set the high for the day. The stock spent the remainder of the day sliding back towards the point where it started the morning. At the closing bell, shares ended the session up two cents to finish at $8.24. Volume for the session, 12.2 million shares, wound up less than half of the amount traded on an average day.

Battered by waves of disappointing earnings, shares of Research In Motion have declined for a good part of the last 52 weeks. The annual high for the stock was set a year ago when it traded for $24.74. Just two weeks ago, share prices sank to a new 12-month low when traders exchanged paper at $6.22. The question for traders is whether a better-than-expected earnings report coupled with buyout rumors and a hefty price gain in the stock removes some doubts about Research In Motion and marks a bottom for share prices.

Other recent headlines for the Research In Motion include a story from the Toronto Globe and Mail stating that Research In Motion outspends Apple when it comes to research and development spending as a percentage of net sales. The company is number one in this category compared to its Canadian peers.

Research In Motion develops hardware and software for use in mobile communications. The company is best known for the Blackberry, which allows users to access email, voice mail, instant messaging, the Internet and intranet applications. The company is headquartered in Waterloo, Canada, and was founded in 1984.

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Published by Alan Masterson

Alan has over 25 years of trading experience in the U.S. equity markets. He began his career in finance working on a program trading desk specializing in over-the-counter stocks. His career progressed from that point to his current position as senior trader on an institutional trading desk. In the evenings, Alan teaches economics at a local community college. He has contributed articles to various publications over the last six years, including feature articles for an economics magazine and various financial blogs. You may contact Alan via his email (alanmasterson@wallstreetpr.com) or his Google+ page (https://plus.google.com/103338576216002376250).

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