A smart Canadian stock for U.S. investors
The smart phone market keeps on growing, says this U.S. advisory, and the top Canadian stock in the field is still the smartest investment.
Phones are far more intelligent than they used to be.
Once, you just picked the thing up and spoke into it. You supplied all the brainpower.
Now your phone can pretty much organize your life for you.
The smart phone is nothing short of a revolution. And the revolution is far from over.
“Don’t look for signs of a downturn in the smart-phone market,” says one leading U.S. advisory.
By the end of January, nearly 43 million Americans owned “one of these mobile gadgets,” says Dow Theory Forecasts. And that number was up 18 per cent from what it had been just three months before.
Across the market, smart phone revenue is due to grow by some 25 per cent over the next few years.
To take advantage of this phenomenon, adds the advisory, U.S. investors should look north — to Waterloo, Ontario, the home of Research in Motion (TSX-RIM; NASDQ-RIMM).
This Canadian stock is the “Analysts’ Choice” in its latest issue.
Still out ahead
The BlackBerry is now more than a decade old, this advisory reminds us. It caught the fancy of the public with its wireless e-mail and is still out ahead of the competition.
The figures are impressive. Over the last five years, Research in Motion has delivered annualized sales growth of 65 per cent and per-share profit growth of 51 per cent.
The company also makes money on services and software, but its hand-held devices account for 82 per cent of its business. And in the first nine months of fiscal 2010 (ended February) it sold 44 per cent more of them than it had in the same period the year before.
The selling price declined by 6 per cent, but this reflects “a shift in product mix rather than pricing pressure,” says the advisory.
The large business market
Across the globe, Research in Motion controls 21 per cent of the smart phone market. In the United States, that share of the market expands to a hefty 43 per cent.
Its share of the American market rose 2 per cent in the three months ended January, extending its lead over Apple (NASDQ-AAPL) and its iPhone, which has 25 per cent of the market.
The crowning success of the BlackBerry has been in the large business market. It has almost 65 per cent of this market.
“Only 7% of the corporate market has been penetrated,” explains the advisory, “and many companies plan to arm their employees with smart phones.”
In one survey of technology executives 43 per cent declared that mobile e-mail was “highly important” to their tech budgets.
The consumer market
Already dominant in the corporate market, Research in Motion is now in hot pursuit of a bigger share of the consumer market.
Through promotions with Verizon Wireless, Wal-Mart Stores (NYSE-WMT) and electronic retailers, the company is pushing new BlackBerrys that are less expensive than the corporate models.
There is one obstacle. The BlackBerry doesn’t have as many applications as the iPhone. Programmers find them more difficult to design for the BlackBerry due to its embedded security features.
“However, those security options should help protect users as mobile banking gains popularity,” adds the advisory.
An appealing price
The robust growth of Research in Motion comes at an appealing price, says Dow Theory Forecasts. The stock is trading at less than 19 times trailing earnings, almost 50 per cent below its average price/earnings ratio for the past five years.
The company has no long-term debt and almost $3 per share in cash. The share count has gone down by 2 per cent in the last year and a new share buyback plan of $1.2 billion was announced last November. It still does not pay a dividend.
The year-end fiscal results come out on Wednesday. Wall Street expects per-share profits to jump by at least 41 per cent.
It is also fair to report that some analyst remain nervous about the BlackBerry’s ability to keep up with the iPhone in the battle for the hearts and minds of non-corporate customers.
The stock is trading today at $77.99, not quite half way between its 52-week high and low.
The competition will only get hotter, but as far as this advisory is concerned, the smartest buy in smart phones is still Canadian.
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