RIM's stock drops 17% on outlook

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NEW YORK (CNNMoney.com) -- Research In Motion's shares plummeted 17% on Friday after the smartphone maker's fiscal third-quarter outlook announced Thursday missed expectations.

The Waterloo, Ontario-based RIM, which makes the BlackBerry, reported earnings after the close of trading Thursday.

A disappointing forecast punished RIM shares more than two hours after the open. Shares fell $14.15, or more than 17%, to close at $68.91.

"I would look at this as an overreaction, and a buying opportunity," said Nick Agostino, analyst at Research Capital. "The report was lighter than expectations, but to say 'significantly lower' is a bit strong."

Excluding one-time charges, RIM (RIMM) said it earned $1.03 per share in its second fiscal quarter, up 17% from earnings of 86 cents a share last year. Revenue jumped 37% to $3.53 billion. Analysts were expecting earnings of $1 per share on revenue of $3.62 billion.

During the quarter, which ended Aug. 29, RIM said it shipped 8.3 million smartphone devices.

But RIM's outlook was not as rosy. For the third fiscal quarter, which ends in November, RIM said it expects revenue of between $3.6 billion and $3.85 billion. Analysts were expecting $3.92 billion.

The company expects earnings per share of between $1.00 and $1.08, while analysts are expecting $1.05. RIM expects to ship between 9.2 million and 9.9 million units in the third quarter.

"Expectation is certainly a key risk," Agostino said, noting that RIM will upgrade many of its devices in its third quarter.

Shares also suffered on some analyst downgrades. Goldman Sachs (GS, Fortune 500) cut its rating on RIM to "neutral" from "buy," while Deutsche Bank (DB) moved it to "sell" from "hold."

Agostino said he left his rating unchanged at "buy," with a price target of $98.

"I'm hoping that as we move toward November and get more visibility on new devices and launch dates, the stock will get a reaction," he said. "We'll need to see about fourth-quarter outlook, but it should be an interesting few months for these guys."