TORONTO - Research In Motion shares sank almost 11 per cent Friday after the BlackBerry maker disappointed investors with its outlook for growth, saying it's making "enormous" investments in its new smartphones and PlayBook tablet.
Shares in RIM (TSX:RIM) were down $6.79 to $55.70 at noon on the Toronto Stock Exchange.
The weakened price comes after RIM delivered its latest earnings report, which included a cautious outlook for its first-quarter growth in fiscal 2012 that left many analysts displeased and investors selling of their stock.
"It requires those bullish on the stock to make a leap of faith," said senior technology analyst Bill Kreher of Edward Jones.
The BlackBerry maker has very wide price swings and is "twice as volatile as the overall market," Kreher said from St. Louis. Mo.
RIM said it expects to earn between US$1.47 and US$1.55 per diluted share for its next quarter on revenue of between $5.2 billion and $5.6 billion, below analyst expectations.
Even at the low end of the outlook scale Research In Motion would be showing substantial growth, since RIM earned $1.38 per diluted share or US$768.9 million in the first quarter of fiscal 2011, with US$4.2 million of revenue.
However, RIM's stock price often reflects investor's anticipation of even faster growth than it delivers.
"When a company such as Research In Motion is considered a momentum play and they don't meet expectations on the revenue side, it can often be very disconcerting to the marketplace," Kreher said.
RIM said the range was slightly wider than normal due to the risk of potential disruption for smartphone components due to the earthquake in Japan, but also because of the development of new devices.
"It's a time of enormous investment and transition," co-CEO Jim Balsillie told analysts a day earlier.
Kreher questioned Balsillie's enthusiasm on the PlayBook launch and a new generation of BlackBerry smartphones.
"In the past, we've felt that some of Balsillie's enthusiasm has been misplaced and we believe that leads to more of a wait and see approach from the market, as opposed to relying on the optimistic view of its leader."
In the fourth-quarter results, RIM's revenue missed estimates by a small margin, coming in at $5.56 billion versus expectations of $5.6 billion.
However, profit was ahead of expectations at US$934 million in its latest quarter, up from $710 million a year ago for the Waterloo, Ont., company.
For the full year fiscal 2012, RIM expects earnings per share to be in excess of $7.50 fully diluted.
Analysts appeared to focus mostly on the negative side of the results, viewing the outlook as particularly concerning.
National Bank Financial analyst Kris Thompson said RIM "shocked" investors with weak guidance on its first quarter of fiscal 2012 based on lower-than-expected shipments and average selling prices.
"No doubt the company is in a transition period," Thompson said in a research note.
"While there are risks that the company trips up with product introduction milestones this year, we like the risk-return profile of this stock. The stock appears set to open lower, which could be a good buying opportunity once the dust settles."
U.S.-based analyst Anil Doralda wasn't quite as optimistic about RIM's future.
"We do not have confidence in RIM's (fiscal) 2012 guidance, based on the uncertainty surrounding the timing and success of its next-generation products," said Doralda of Chicago's William Blair & Co. in a note to clients.
