You may have noticed a pattern with my trades during the past
few weeks: I've been picking "underdog" stocks with great success.
My latest pick,
Facebook (Nasdaq: FB)
, has gained more than 10% in a week. And my previous pick,
Tesla Motors (Nasdaq: TSLA)
, is up more than 8% in two weeks.
This week, I'mbullish on the underdog stock of the smartphone
Research In Motion (Nasdaq: RIMM)
. As a Canuck, I've always had a softspot for the Canadian wireless
device maker. But what I really like about the stock is its current
bullish technical outlook.
On the heels of recent analyst upgrades -- from the National
Bank, CIBC World Markets and Jefferies -- RIMM appears to be
sparking renewed trader enthusiasm. The upgrades are based on bets
that RIMM's new mobile device, the Blackberry 10 (BB10) -- likely
to be released in late January --will be so good it will steal
users away from
Apple (Nasdaq: AAPL)
, bringing them back to their Blackberry roots.
Conservative estimates are that BB10 sales will be in the range
of 8 million to 9 million units in 2013; however, some industry
experts project sales could easily be double that, at around 19
million to 20 million units.
Currently, there are about 80 million Blackberry users
worldwide. The new BB10 device could potentially increase RIMM's
customer base by 10% to 25%. A growing customer base should be no
problem for RIMM to handle. Currently, Blackberries run on 565
wireless networks in more than 175 countries. In contrast, Apple's
iPhone runs only on 227 carriers worldwide.
From a technical perspective, the stock currently looks to be an
ideal buy.Shares are still cheap, and appear to be heading due
However, it should be acknowledged the stock has taken a long,
hard fall since its 2011 glory days, when it traded at a high of
$70.54. In just under two years, shares have lost more than 90% of
their value, slipping to an all-time low of $6.22, before finding
support around this level.
Bouncing off support in October 2012, the stock has been slowly
making its wayback up . In late October, shares completed a
significant technical milestone: They bullishly broke through
themajor downtrend line. The stock has been ticking up, on aminor
uptrend , ever since.
On recent analyst upgrades, RIMM just blasted through resistance
near $9.50. In doing so, the stock bullishly completed a U-shaped
technical formation, known as a basing pattern. According to
themeasuring principle for a basing pattern -- calculated by adding
the height of the pattern to the breakout level -- shares could
potentially reach a newprice target of $12.92 ($9.57-$6.22 = $3.35;
$3.35+$9.57 = $12.92. At current, this target represents 10%
potential gains. However, with bullish momentum, it's plausible the
stock won't stop until around $14.67, an area of more
Although the company's fundamental outlook is not overly strong,
the new BB10 may help push revenue andearnings up over the
For the fiscal 2013 year, analysts project revenue will drop 40%
to $11.1 billion, from $18.5 billion in 2012. But, byfiscal year
2014, analysts expect strong BB10 sales will send revenue back into
the positive, with RIMM clocking a 1% gain on $11.2 billion in
The earnings outlook is similar. Analysts project fiscal year
2013 earnings will drop to -$1.26, per share from +$4.20 last year.
By 2014, the gap is expected to narrow with earnings trending
closer to the positive at -$0.56. However, it should be noted,
during the past 90 days, earnings estimates have been upwardly
revised. Three months ago, analysts estimated 2013 earnings would
fall to -$1.52, while 2014 earnings would be a dismal -$0.63.
Today, the estimates are +16.5% and +13% higher, respectively.
Risks to consider:
The stock has moved quickly during the past week. But the real
growth ahead may be slow and steady, taking place over
approximately the next year. During this time, the company has a
daunting task ahead of it. It must launch a new device that not
only wins over existing customers, but is so it good it also lures
in new users. The BB10 may be a make-or-break-it product for RIMM.
Judging by current analyst and trader sentiment, so far, it looks
like the company will "make it."
Action to Take -->
Buy RIMM at themarket price . Set stop-loss at $9.56,
slightly below support. Set initial price target at $14.67 for
a potential 26% gain by late 2013.
This article originally appeared on TradingAuthority.com:
A Bet on This Underdog Could Land You 25%-Plus
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