Buying Opportunity?

Research in Motion (RIMM) released earnings aftermarket today, missing analyst expectations by a penny (although they were within their own projections). The stock subsequently dropped over 8% in after hours trading. The question to ask is: Why?

There could be several reasons for this large decline, one being the increased competition in the smartphone market. The introduction of a new and improved iPhone and the numerous upstart companies offering Blackberry and iPhone clones has made this industry more competitive, and complex, than ever before. This added competition coupled with the sharp increase in share price since February makes me wonder if a short term (or even long term) buy in RIMM is a good play.

Despite these negatives, you have to ask yourself if the beating put on RIMM by the market is justified. For one thing, everyone (and by everyone I mean people in my inner circle) still seems to be buying Blackberries, although no one seems to know how to use them. Further, the run-up in stock price in the past few months merely pulled the price back up to where it was before it collapsed, so it is no more overvalued now than it was in November, and even less so when you consider it's earnings can't seem to stop doubling.

On June 13th Apple (AAPL) shares dropped to $170 from a peak of $189.43 a little over a week earlier (-10.3%). That is where I got in. By June 17th it was up to $181.43 (+6.7% over a span of 2 business days). I am not saying that this is the same situation; I had been following Apple for months when this happened, I can't say the same about RIMM. Further, I think Apple is a better company than RIMM and that for whatever reason you want to choose, people will buy the iPhone. What I can say is that this could be an overreaction similar to what has happened to so many other stocks in this up-and-down, no memory market. Based on this alone, I wouldn't mind taking a gamble on RIMM and seeing if it pays off. I won't due to a lack of assets, but I am really eager to see what happens with this. Unfortunately we won't know for a few days.