Research In Motion shares down 18% in 5 Days

This week was brutal for Research in Motion (NASDAQ:RIMM) shareholders after the Credit Suisse downgraded the stock to the equivalent of a sell rating, these days you can't bet against the analysts.

The timing for the downgrade was the perfect storm to push RIMM shares down even lower, it came two days after Research in Motion warned that earnings for the current quarter would come in at the low end of expectations, despite stronger- than-expected subscriber growth.  Credit Suisse is worried that RIM will have a harder time holding on to its market share and maintaining profit margins. Thus from almost $60 a share to Friday's closing price of $48.51 then down to $48.39 after-hours.

Credit Suisse's analyst Kulbinder Garcha wrote: "We maintain our view that RIM's share gains will slow given share loss in North America, offset by some traction internationally." However, says the new devices are hurting RIM another way. He cites his "teardown analysis" that shows the bill of materials for the Bold and the Storm is "structurally higher" than that of older BlackBerry devices. The higher cost hurts profit margins on the devices.Also, Garcha says heavy promotion spending by RIM is not a good sign. "We see signs of aggressive pricing from RIM for virtually all recent product introductions driving double-digit ASP [average selling price] declines," Garcha wrote.

Other analysts are also growing more cautious on RIM. In a note to clients Friday, Keith Bachman of BMO Capital Markets trimmed back his earnings and revenue estimates for the company. But he maintained his neutral rating -- and even raised his price target on the stock, to $55 from $48.

"We believe that investor expectations have been appropriately re-calibrated," Bachman wrote in the report. "Moreover, we believe that gross margins on the high end, 3G products (Bold/Storm), have and will improve gross margins over the next few quarters, such that over all product and company gross margins, can remain flat or even gradually increase." 

Tough week for RIM and at some point shares could become undervalued after losing close to 20% in just a few days.

SOURCE: http://money.cnn.com/news/newsfeeds/articles/djf500/200902131200DOWJONES...