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Originally Posted by ScottFromCalgary
Let the Calgary/KW pissing match comence.
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No need for a Calgary/KW fight. The Calgary oil sector and boom are both much larger than Waterloo's tech sector and boom. I can easily admit this. However, both cities are doing well and I think we can respect each other for our different business sectors. If Canada is to succeed and be a global leader, we need global companies in many different sectors.
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Originally Posted by ScottFromCalgary
Seriously though RIM has an outrageous P/E multiple and is wildly overpriced by just about any metric IMO.
In regards to the talk about RIM being the largest company in Canada, perhaps it narrowly beats RBC in market cap, but take a look at real money:
RIM Q2 Revenue: $1.37B
Net Income: $287.7M
Royal Bank Q2 Revenue: $5.48B
Net Income: $1.395B
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As Waterlooson mentioned, it's all about the growth rate.
Period - Revenue (US$millions) - Net Income (US$millions) - Subscribers (in thousands)
2003 - 306 - (148) - 534
2004 - 594 - 47 - 1,069
2005 - 1,350 - 205 - 2,510
2006 - 2,065 - 374 - 4,900
2007 - 3,037 - 631 - 8,000
2Q2008 - 1,372 or *4 = 5,488 annualized - 287 or *4 = 1,148 annualized - 10,500
Expected 3Q2008 - 1,600to1,670 or 6,400 annualized - 339to362 or 1,356 annualized - 12,000
As you can see, there's been large increases over the past 5 years and the trend continues with a jump between Q2 and Q3 (which ends soon ~December 1st). It's likely RIM currently has 11.5 million subscribers as of October 25, 2007. "Subscriber account additions in the third quarter are expected to be approximately 1.65 million." Since this is a city discussion forum, let's relate this growth to cities. RIM is growing by a:
- North Battleford every day.
- Thunder Bay every week.
- Waterloo Region every month.
- Calgary every two months.
- Inner Ring Golden Horseshoe (Toronto-Hamilton) every year.
So sure the stock is expensive with only 11.5million subscribers, but is it still expensive looking out two years from now with 25 million customers?
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Originally Posted by ScottFromCalgary
You misunderstand my argument. I'm not saying the market got it wrong or that RIM does not deserve a large P/E. Clearly they have high growth rates. All I'm saying is that the law of large numbers has to come into play at some point and growth will slow, just ask Microsoft. At that point the P/E will drop and unless RIM has earnings numbers somewhere in the ballpark of RBC then their market cap will be lower. Yes RIM will diversify into other products and blah, blah, blah growth will continue and the market will probably always give them a higher multiple than a bank. But they have a long way to go to reach RBC's earnings.
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I hear and understand what you're saying, but also realize the market is pricing in expectations that RIM will eventually match (or come much closer) to RBC's earnings. The market is willing to look ahead a bit, and can see the potential only two years in the future when RIM's customer base will be double the current level.
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Originally Posted by ScottFromCalgary
The problem with momentum growth stocks like RIM is that eventually something happens that knocks down these precariously perched stocks. They break down real fast and as Kevin O'Leary says - "grown men will weep".
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I watch SqueezePlay daily. Kevin wasn't on Wednesday, but he was there on Tuesday and mentioned how he'd been wrong on RIM. He went bearish on the stock back in 2005, but now admits his arguments back then didn't materialize.
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Originally Posted by ScottFromCalgary
The implication behind the posts from the Waterloo forumers is that RIM's success is KW's success, and that is somewhat true. I'm just saying that a company with a huge market cap and relatively low earnings doesn't have the same amount of positive economic effect on its community as a company with tons of real earnings and investment. For example, according to the statement of cash flows in their most recently reported quarter:
Cash Used in Investing Activities (net of short term investments)
RIM: $ 105,830,000
Suncor: $1,322,000,000
Encana: $1,189,000,000
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Once again I hear what you're saying, but please realize that the RIM numbers are growing very rapidly. 100million one year can quickly become 200 million the next or 500million in a few years.
Still though, market cap can have a very positive effect on a community as well. For example, the 3 RIM billionaires (and other millionaires) have invested a few hundred million of their own money into research institutes, schools, and other causes throughout the community. They also employ ~5,000 people in Waterloo Region with 408 openings as of today. It wouldn't surprise me to see their employee count in Waterloo hit 10,000 over the next few years.
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Originally Posted by Waterlooson
I would estimate the combined net worth of RIM's top two executives (residents of Waterloo) at around $7 billion
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Even better, I'd estimate:
Lazaridis (Michael) @ $4.475 billion
Balsillie (James L) @ $4.258 billion
so combined $8.733 billion. There's also a 3rd RIM billionaire in Waterloo.
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Originally Posted by caltrane74
I will give WaterlooInvestor this, RIM is changing the way all Canadian businesses will be viewed in the future. They are truely on the leading edge of technology in a way Nortel could never say it was.
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Awhile back on SSC, we were talking about Canada and a European mentioned Blackberry as one of our Canadian brands. If we want to be known as a nation of modern glass vibrant cities - being known as a country with technology helps. RIM is helping to boost Canada's image abroad.
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Originally Posted by ScottFromCalgary
@Waterlooson: Yes I have heard of all of those facilities (only on this forum though - actually it seems like that's all I ever hear from the KW people), their is no doubt that RIM and its founders have been generous to Waterloo. Also, I really hope that RIM does become as large as Microsoft or Google some day, I just don't see it happening. Feel free to buy a whole swack of RIM stock, I just won't be joining you. I would consider having it as 1% of my portfolio at most.
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Honestly it does sound beyond belief that Waterloo could have a $200-300 billion market cap company.
That said, tech companies are only as good as their workforce. There are many years when Microsoft hires more grads from the University of Waterloo than anywhere else in the world. Obviously RIM has home-field advantage in recruiting Waterloo students. Lazaridis is also the chancellor of the university.
Heck, if tiny Finland can build a Nokia ($160-billion market cap), surely a G7 country like Canada can do the same.