Research In Motion Limited (NASDAQ:RIMM) designs, manufactures and markets wireless solutions for the worldwide mobile communications market. The company provides platforms and solutions for access to time-sensitive information, including e-mail, phone, short messaging service, organizers, Internet and intranet-based corporate data applications. RIM also licenses its technology to handset and software vendors to enable these companies to offer wireless data services based on its BlackBerry wireless platform and the RIM Wireless Handheld product line.
Readers have been clamoring for more bullish positions and we believe this is a good candidate for traders with some extra portfolio capital who like to "bottom-fish" for recently downtrodden stocks. Until yesterday, Research In Motion was firmly in that category, haven fallen from grace nearly 3 months ago, even as the market was hitting multi-years highs. Now the stock is in "rally mode," up over 15% since announcing it will pay $450 million to settle its three-year patent dispute with NTP Inc. RIM said the settlement covers all current and future NTP patents and analysts say the deal is good for RIM because it removes some major legal issues for the company, including the risk it could be barred from selling its flagship product in the United States.
The company is expected to report earnings in early April (4/5/05), but investors will likely be focused on the details of the settlement, which RIM will outline in its fourth-quarter conference call. Another important consideration is the condition of the market at that time, so traders will certainly need to assess the technical character of the issue and the broader stock indices, immediately prior to the announcement. While this position has a favorable risk-reward outlook, it may not be appropriate for more conservative traders, thus we do not believe it should be listed in the MCM Portfolio.
Fundamentals Chart Earnings Dates Analyst Ratings
PLAY (speculative - bullish/credit spread):
BUY PUT APR-60.00 RUP-PL OI=6713 ASK=$0.40
SELL PUT APR-65.00 RUP-PM OI=9359 BID=$0.80
INITIAL "NET-CREDIT" TARGET = $0.45-$0.55
POTENTIAL PROFIT (X 5 contracts) = $225
RETURN ON INVESTMENT (max) = 9%
COST BASIS = $64.55
LOSS-LIMIT/EXIT POINT = $71.00 (cons) - $66.00 (aggr)