Monday, April 5, 2010
RIMM: Chart, Fundamentals Suggest Bargain---BUY!
Carter Worth was on CNBC's Fast Money giving his 'Chartology' on RIMM. He noted a 'wedge' formation, I agree, but there's also a channel formation. Carter pointed out the 150- day moving average..about $68, Itz believes RIMM could see $66, but the trend is higher. Back in December the gap up should of been faded. This time the gap down should be used to add or buy. The valuations suggest RIMM is 'CHEAP'.
When looking at the market's historical valuation of RIMM, we can demonstrate further reasoning why it is price to deliver above average returns. For example, RIMM has normally traded for a price-to-cash earnings multiple of 15.3x to 43.4x, but the current metric falls below that range at 14.8x. Similarly, with a price-to-sales ratio of 2.61x, the stock looks rather undervalued compared to the historically normal range of 3.43x to 10.44x. Now, to be clear, we would not expect Research in Motion to achieve anywhere near the top end of those historical valuation ranges, but if it were able to meet the bottom end of the ranges, based on current fundamentals, we would expect a price of $86 per share. >>READ MORE
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