Good results, bad outcome

What does a company have to do to drive share price higher? Research In Motion yesterday announced excellent first quarter results: revenue up 24 per cent, earnings up 41 per cent and shipments up 43 per cent. In total, RIM has shipped more than 100 million BlackBerrys, about twice as many as Apple has sold iPhones.

To put this success in another context, in its first five years of BlackBerry sales from 1999-2004, RIM signed up a total of one million subscribers. During the most recent three-month period, RIM signed up almost five million new subscribers.

If you thought such good news would drive up share price, you’d be sadly mistaken. After falling $1.06 during the day yesterday, the slide continued in after-market trading and seems to be still on the skids this morning in pre-market action. Not even the announcement that RIM would buy back up to 31 million shares has helped.

Markets are all about momentum. At the moment, Apple has the momentum with the launch of the newest iPhone drawing lineups from Tokyo to San Francisco. “Clearly for many market participants worried about competition from Apple and Google, RIM has become a show-me stock,” wrote analyst Michael Urlocker of GMP Securities in his overnight note to clients. Urlocker maintains his buy on the stock and has a US$85 target, well above the current $55 price. Deepak Chopra of Canaccord Genuity also maintains his buy rating with a US$110 target.

So the analysts like RIM and the numbers are good. But it makes a fellow wonder whether this market is only for professionals, the folks who make money by going short and driving the price down. It sure isn’t a market for the little guy expecting predictable outcomes from terrific results.

(Disclosure: Whenever I write a book about a company, I buy shares when I begin research and sell them once the book has been published and all the information I have gathered is available to anyone. It’s not that I think I’m a market maker, I just don’t want there to be a scintilla of concern about a conflict that I profited because I might have heard something before everyone else. I did this with my book on Manulife, published last year, and I followed my own rules with RIM, too. As a result, I bought RIM for my RSP account in May 2006. With the book published on March 2, 2010, I sold RIM in April 2010.)