The latest news received in Mobility may have as much to do with gasoline as it does with product segment disruption driven by Apple's iPhone and Google's Android. If consumer caution has increased in mobile phones, then investors had better steer clear of Consumer Discretionary stocks for as long as gasoline is this high and threatening further inflation.
Relative tickers: Nasdaq: RIMM, Nasdaq: AAPL, NYSE: NOK, Nasdaq: MSFT, NYSE: HPQ, NYSE: MOT, NYSE: MSI, Nasdaq: QCOM, NYSE: ALU, Nasdaq: ACOM, Nasdaq: SPWRB, Nasdaq: SPWRA, Nasdaq: FFBH, Nasdaq: NTGR, Nasdaq: WEBM, Nasdaq: STBC, NYSE: LVB, Nasdaq: ASGN, NYSE: MXL, Nasdaq: TNAV, Nasdaq: GBLI, Nasdaq: SCEI, NYSE: NR, Nasdaq: AMTC, NYSE: DRL, NYSE: TGS, NYSE: N, NYSE: LFT, AMEX: AIM, Nasdaq: SWKS, NYSE: KEG, Nasdaq: ZNWAW, Nasdaq: INUV; Losers – Nasdaq: REGN, Nasdaq: USATW, NYSE: HRZ, Nasdaq: KVHI, Nasdaq: EDSWW, NYSE: SKH, Nasdaq: USAT, Nasdaq: SUNH, Nasdaq: INPH, Nasdaq: SPPI, Nasdaq: ENSG, Nasdaq: ROSA, Nasdaq: CNGL, NYSE: ZZ, Nasdaq: GDOT, Nasdaq: CTCT, Nasdaq: SURW, NYSE: IM, Nasdaq: GFRE, Nasdaq: DECK, Nasdaq: TGIS, Nasdaq: DRIV, NYSE: RAS
Research in Motion (Nasdaq: RIMM) dropped 14% Friday. RIM was slammed by a downgrade and severe price target slashing by RBC Capital Markets. Unfortunately, that followed the company's forecast revision, which was the real catalyst for the stock's slide. RBC cut the stock to "Sector Perform" from "Top Pick," and reduced its price target to $55 from $90.
Really? Are you serious? Can a story change that much overnight? A $35 change to a $90 price target calls for some serious explaining, not just to the investors who followed the advice, but to the boss. We're talking about a reduction of forecast value to 61% of the estimate that stood a day prior. As an analyst, I understand that when dealing with high-technology, emerging growth companies, significant shifts can occur in value opportunity (keyword). This is why we use scenario and sensitivity analysis, to hedge against this kind of catastrophe - if the analyst was ever right in the first place or is even right currently. Analysts are employed to at least come close, and that $35 shave is better suited for Vegas than Wall Street.
Research in Motion cut its first quarter profit outlook, and looks to be following the path of other Apple (Nasdaq: AAPL) iPhone and Android (Nasdaq: GOOG) competitors turned footstools. The list includes Palm (saved by HP (NYSE: HPQ)) and Nokia (NYSE: NOK). Motorola (NYSE: MOT, NYSE: MSI) is so long gone that we almost forgot to mention it, sort of like a rotary dial telephone, irrelevant.
RIM cut its May-ending Q1 profit forecast to a range of $1.30 - $1.37 a share, down from $1.47 to $1.55. Yahoo Finance (Nasdaq: YHOO) had the analysts' consensus EPS estimate for RIMM at $1.48, and the lowest mark at $1.40, so even the most pessimistic of analysts surveyed was too optimistic in reality. Before last week, I bet the analyst with the low estimate felt naked; he was probably even pressured by his boss to stay tighter to the consensus from which he bravely ventured. We hope he made sure to see the boss took notice of RIM's news.
One of the company's CEOs (seems one too many) said in the conference call that it was a margin issue hurting the bottom line, which he blamed on aged high-end product. That seems to show a misconception, or hopeful desperation. The view from inside a company is often completely different than from the outside. If we were at dinner tonight, and I was Apple, and my date was RIM, I would likely say, "It's not you RIM, it's me."
Given Broadcom's bad news earlier in the week and RIM's news to close out the week, not to mention the ongoing saga at Nokia (NYSE: NOK), I would be looking to get out of all mobile telecommunications stocks today. When Broadcom analysts blamed BRCM's drop on general product demand slippage in mobility, we had our doubts, but BRCM's customer list does not mention Research in Motion.
I would take my view a step further even. I'm wavering from all Consumer Discretionary shares for as long as gasoline remains near current levels, while threatening to go higher. This mobility squeeze may have as much to do with gasoline as it has to do with Apple and Google disruption. If consumers are being more cautious with regard to what is now considered a non-discretionary spend in mobile phones, then how much closer to the vest will discretionary money be kept? We said last week that the old adage, "Sell in May and Walk Away" seemed to make good sense today. With regard to consumer discretionary shares, I think you can add an exclamation point to that.
Article should interest investors in Apple (Nasdaq: AAPL), Nokia (NYSE: NOK), Microsoft (Nasdaq: MSFT), Google (Nasdaq: GOOG), Hewlett-Packard (NYSE: HPQ), Motorola (NYSE: MOT), Motorola Solutions (NYSE: MSI), QUALCOMM (Nasdaq: QCOM), Alcatel-Lucent (NYSE: ALU) . Friday's other most active stocks were led by: Gainers – Ancestry.com (Nasdaq: ACOM), SunPower (Nasdaq: SPWRB, SPWRA), First Federal Bancshares of Ark (Nasdaq: FFBH), Netgear (Nasdaq: NTGR), WebMediaBrands (Nasdaq: WEBM), State Bancorp (Nasdaq: STBC), Steinway Musical (NYSE: LVB), On Assignment (Nasdaq: ASGN), MaxLinear (NYSE: MXL), TeleNav (Nasdaq: TNAV), Global Indemnity (Nasdaq: GBLI), Sino Clean Energy (Nasdaq: SCEI), Newpark Resources (NYSE: NR), Ameritrans Capital (Nasdaq: AMTC), Doral Financial (NYSE: DRL), Transportadora de Gas (NYSE: TGS), Netsuite (NYSE: N), Longtop Financial (NYSE: LFT), Aerosonic (AMEX: AIM), Skyworks Solutions (Nasdaq: SWKS), Key Energy (NYSE: KEG), Zion Oil & Gas (Nasdaq: ZNWAW), Inuvo (Nasdaq: INUV); Losers – Regeneron (Nasdaq: REGN), USA Technologies (Nasdaq: USATW), Horizon Lines (NYSE: HRZ), KVH Industries (Nasdaq: KVHI), Exceed (Nasdaq: EDSWW), Skilled Healthcare (NYSE: SKH), USA Technologies (Nasdaq: USAT), Sun Healthcare Group (Nasdaq: SUNH), Interphase (Nasdaq: INPH), Spectrum Pharmaceuticals (Nasdaq: SPPI), The Ensign Group (Nasdaq: ENSG), iPath Short Extended Russell (Nasdaq: ROSA), China Nutrifruit (Nasdaq: CNGL), Sealy (NYSE: ZZ), Green Dot (Nasdaq: GDOT), Constant Contact (Nasdaq: CTCT), SureWest (Nasdaq: SURW), Ingram Micro (NYSE: IM), Gulf Resources (Nasdaq: GFRE), Deckers Outdoor (Nasdaq: DECK), Thomas Group (Nasdaq: TGIS), Digital River (Nasdaq: DRIV) and RAIT Financial (NYSE: RAS).
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