On Friday morning I discussed the relative good news from Nokia (NOK) and what that might mean for Research In Motion (RIMM). I suggested that Nokia's share climb Thursday should lead to some solid pin action for RIM. It did: The stock rose 14% Friday and another 10% Monday.
It's likely that, with Nokia's positive pre-earnings announcement, more people became aware of the low number of BB10 smartphones RIM would have to sell in order to beat the Street's low expectations. After all, Nokia "only" sold 4.4 million Lumias in the last quarter. Yet, judging by the market's reaction, you would think it came close to a more Apple (AAPL)-like 30 million.
RIM sold 6.7 million of its oldest smartphones last quarter. If the company is able to keep up that level for the old BB7s, and sell even 10 million of the new BB10s, the quarter will be a home run. But there's a good reason to think the company might even sell more than that in the May quarter.
Out of the 575 carriers with which RIM already has relationships, 150 are testing the BB10. Most of those are likely to make initially big purchases, and to give the device a fair push, as they try to break the Apple-Android duopoly. According to the China-based QQ-Tech website, Bell Canada (BCE) has said the BB10s will sell for a full retail price of Canadian $799 -- which, if true, is surprisingly high.
If RIM is able to sell 10 million BB10s at that price in a quarter, you can imagine this would imply sales of $8 billion in the quarter -- just for BB10s. At the moment, the May quarter's consensus estimate is for $3.2 billion in sales, along with a $0.12 loss per share.
Let's say the Chinese reports of BB10's average selling price are wrong, and that the number will only be half that. That's still $4 billion in revenue -- over and above the $2.7 billion RIM achieved in its most recent quarter from selling the BB7s. That number would also exceed RIM's old services-revenue stream, which CEO Thorsten Heins has said would shrink over the coming year.
The bottom line is that it seems possible Research In Motion could beat May estimates by double. If so, it would be a boon to the stock.
I think that's part of the reason why RIM's shares have gone up so much in recent days, even beyond the move in Nokia. There's also been significant call-buying of late.
I believe the stock's momentum will continue through the new product launch at the end of the month. After that, I think we could see a pullback -- depending on how much further the stock goes, of course. But my guess is that there will be some "sell-the-news" action after the product launch, as well as hand-wringing from analysts worried that RIM won't be able to sell enough phones to justify where the stock price will be at that point.
But, once that pullback completes, you will want to start preparing for the May earnings results, which could be very positive.