It's understandable how some investors could look at Research in Motion's temptingly low 5 P/E ratio, factor in the tremendous growth of the smartphone market, and conclude that the BlackBerry maker is worth a roll of the dice.
Don't be fooled. RIM is a classic value trap. "We see this as a no-growth story going forward," says Edward Jones analyst Bill Kreher, who has an underweight rating on the stock. "In the second quarter the smartphone market grew 65%, yet RIM's shipments increased only 11%. What's going to happen when the smartphone category starts to normalize?"
The demise of Research in Motion underscores how quickly tech fortunes can swing. In 2008, when RIM's stock peaked at $144 a share (it recently traded at $31), BlackBerry's share of the smartphone market was double that of the iPhone and Android combined. Today BlackBerry trails both. Could a white knight emerge for RIM as it did for Motorola -- bought in August by Google for $12.5 billion? Sure. We just wouldn't bet on it.
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