RIM Rises to Highest Level in Almost a Year as Apple Stumbles
Comment of the Day

January 14 2013

Commentary by Eoin Treacy

RIM Rises to Highest Level in Almost a Year as Apple Stumbles

This article by Hugo Miller for Bloomberg may be of interest to subscribers. Here it is in full
Research In Motion Ltd., the maker of the BlackBerry smartphone, is trading at its highest level in almost a year amid signs that demand for Apple Inc.'s market- leading iPhone is ebbing.

RIM's stock rose 9.4 percent to $14.83 at 10:37 a.m. in New York, following a 14 percent gain on Jan. 11. Shares of the Waterloo, Ontario-based company climbed to $15.04 earlier in today's session, its highest intraday price since Feb. 22.

Apple reduced its orders for iPhone 5 screens this quarter, Japan's Nikkei newspaper reported today, signaling that demand is slowing. After years of losing market share, RIM is counting on its new BlackBerry 10 lineup to win back customers from Apple and Google Inc.'s Android. The company plans to unveil the phones on Jan. 30, before they go on sale in February and March.

RIM's stock has more than doubled since late September, fueled by optimism that the struggling company can build a comeback around BlackBerry 10. Sprint Nextel Corp. reiterated its support for the BlackBerry last week at the Consumer Electronics Show, ensuring that all of the largest U.S. carriers will offer the new phones.

Eoin Treacy's view The fortunes of two companies could not be more different than those of Apple and Research in Motion. From 2008 when the shares traded at similar prices, Apple went on to dominate the online music, smart phone and tablet markets while Research in Motion failed to keep up with the pace of innovation and its share price collapsed.

This ratio of the two shares gives us a clear picture of Research In Motion's underperformance until late September and subsequent outperformance. In absolute terms the share rallied to break the medium-term progression of lower rally highs by November and has been consolidating in the region of the 200-day MA since. A sustained move below $10.70 would be required to question medium-term scope for some additional upside.

Apple dropped from $700 to $500 between September and November and has been ranging above $500 since. It will need to sustain a move back above the 200-day MA, currently near $570, to begin to suggest a return to demand dominance beyond the short term.

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