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RIMM: Will Thursday's Earnings Prompt a Short Squeeze?


Technical analysis and earnings projections for Research In Motion.

MINYANVILLE ORIGINAL Five o'clock p.m. on Thursday, December 20, will be a big moment for Research In Motion (NASDAQ:RIMM). The company's upcoming conference call is set to permit analysts to pick apart earnings reported then and management's commentary on that subject and future strategies. Additionally, the company plans to unveil a highly anticipated new product (or products) at the end of January.

I'm fairly inclined to agree largely with Forbes' Eric Savitz's take published December 14, in which Savitz highlights William Blair analyst Anil Doradla's warning that the BlackBerry smartphone maker could "deliver investors a pre-holiday lump of coal."

Having said these things, RIMM shares have had a heck of a run since the August 14 close of $7.56. Recently trading at $14.02, that's about an 85% increase-a period for which the S&P 500 (INDEXSP:.INX) is flat.

Here are some calculations I put together based on data posted by NASDAQ.

Shares outstanding are at a little over 516 million. Almost 298 million of those are in the hands of the top five holders. As of the end of November, short interest had risen to almost 114 million shares, about 22% of shares outstanding.

Looking at the short interest as a percentage of average daily volume, that quantity was at a lofty 728% around the time of its August lows. That same quantity has come down markedly recently to around 200%. That's where it was hovering at year-end 2011 and early this year when the stock traded at its trailing twelve-month peak in the $17 - $18 range.

Here is the breakdown of analyst estimates, courtesy of Yahoo Finance.

To me, the current RIMM discussion is reminiscent of where Novell stood vis-à-vis Microsoft in the business-network operating-system market slightly more than a decade ago. Novell's advantages touted then were its first-on-the-scene dominant installed base, along with server operating reliability most experts agreed was superior to Microsoft's. One could say that RIMM's positioning in corporate email has an analogous history. RIMM's experience with new product has not always been met with oohs and aahs. (Remember PlayBook and the need to plug in a BlackBerry?)

Short squeezes can be painful and sharp. Stocks at RIMM's current stage of the process have been known to double or more prior to selling off. Nevertheless I would argue that there seems little in the way of expectable events in the near term likely to disruptively alter the basic fundamental framework in which the company operates. Android- and Apple-powered devices continue to march ahead in this space, once considered a stuffy corporate consumer whose primary concerns were limited to email.
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No positions in stocks mentioned.

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