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Foolish Forecast: When Will the BlackBerry Balloon Pop?

BlackBerry designer Research In Motion (Nasdaq: RIMM  ) is set to report first-quarter earnings Wednesday night. Will we get a sweet, juicy cobbler, or just the prickly thorns from this bush?

What Fools say:
Here's how Research In Motion's CAPS rating stacks up against some of its peers and competitors:

 

Market Cap (billions)

Trailing P/E Ratio

CAPS Rating

Google (Nasdaq: GOOG  )

$171.2

37.7

***

Apple (Nasdaq: AAPL  )

$154.0

36.0

****

Nokia (NYSE: NOK  )

$94.4

8.4

****

Research In Motion

$79.3

62.4

***

Palm (Nasdaq: PALM  )

$0.7

N/A

*

Data taken from Motley Fool CAPS and Yahoo! Finance on June 24, 2008.

"To the moon, Alice," says CAPS All-Star salukitrader, who has an outperform rating on the stock. Fellow star player geekdiver counters that with some hard data: "Compare market caps of this stock and Nokia, then compare penetration. Nokia has 10x the penetration but RIMM is within 10% of NOK's market cap."

What management does:
Most companies are happy to see sales growth -- Research In Motion has sales acceleration going on. Gross margins are dropping, but all other important margins are moving in the right direction.

Margins

12/06

3/07

6/07

9/07

12/07

3/08

Gross

55.1%

54.6%

53.6%

52.5%

51.6%

51.3%

Operating

27%

26.6%

26.5%

27.1%

27.8%

28.8%

Net

17.2%

20.8%

20.7%

20.7%

21.1%

21.5%

FCF/Revenue

1.1%

15.9%

16.7%

13%

16.3%

20.4%

Y-O-Y Growth

12/06

3/07

6/07

9/07

12/07

3/08

Revenue

39.7%

47%

57.6%

76.3%

89.6%

97.9%

Earnings

31%

68.6%

94.9%

116.5%

133.1%

104.9%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
The BlackBerry maker is clearly on a roll right now. That's at least five quarters in a row of increasing sales growth, fueling an almost equally impressive earnings trend and massive cash flows.

But as our CAPS players indicated, there are some massive expectations built into the stock price. The party is simply supposed to go on, fierce competition in a swiftly changing marketplace notwithstanding. Apple's iPhone has raised the bar for what a smartphone can do and what it should cost, and Google may change the game again once its partners start to release Android-based handsets.

We have seen some encouraging signs of a healthy handset market, so I wouldn't be surprised to see the gravy train rolling on a bit further. But keep in mind that buying Research In Motion stock is akin to playing "hot potato" -- at some point, commoditization will burn investors badly. Don't get caught holding the scalding potato at the wrong time.

Google is a Motley Fool Rule Breakers pick. Apple is a Stock Advisor recommendation. Try any of our Foolish newsletters today, free for 30 days. Or just sign up for a free CAPS account to find the identities of the Fools who were quoted above. They might have more to tell you!

Fool contributor Anders Bylund is a Google shareholder, but holds no other position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure is the Punxsutawney Phil of financial forecasting.


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Anders Bylund
TMFZahrim

Anders Bylund is a Foolish Technology and Entertainment Specialist. Where the two markets intersect, you'll find his wheelhouse. He has been an official Fool since 2006 but a jester all his life.

Hypoallergenic. Contains six flavors not found in nature. Believes in coyotes and time as an abstract.

Follow Anders on Twitter, LinkedIn, and Google+.

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