RIM, Nokia, Facebook and Yahoo were dead money for awhile earlier this year, but they have sprung back to life. That doesn't mean they're healthy yet.The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, and Abbott Laboratories, La Monica does not own positions in any individual stocks.
At one point this year, investors were assuming that the market for mobile devices and advertising began and ended with just two companies: Apple (AAPL) and Google (GOOG). They were the Home Depot and Lowe's of wireless. Nobody else mattered.
But four tech companies with a presence in mobile have recently sprung to life, while Apple and Google have pulled back: Research in Motion (RIMM), Nokia (NOK), Facebook (FB) and Yahoo (YHOO).
If Apple, Google, IBM (IBM) and Amazon (AMZN) are the new Four Horsemen of Tech, then RIM, Nokia, Facebook and Yahoo are their cousins, the Four Zombies of Tech. The undead walk among us! For the most part, the recent rallies are predicated on the notion that each of these companies will make a bigger splash in mobile.
BlackBerry maker RIM surged more than 5% Thursday after Goldman Sachs upgraded the stock to a buy. This continues a stunning stock rebound for RIM since the summer. Shares more than doubled from their 52-week lows as analysts and investors became more optimistic about the company's upcoming (at long last) release of its BlackBerry 10 operating system.
Nokia has also more than doubled from its low point for a similar reason. Reviews of the company's Lumia smartphone, which runs on Microsoft's (MSFT) Windows Phone operating system, have been very favorable, stirring hopes that strong sales could follow.
The big knock on Facebook following its boondoggle of an IPO in May was that it had no mobile strategy, but shares of Facebook are now up more than 50% from their 52-week low. Much of the excitement revolves around the fact that Facebook has found a way to quickly make money off of mobile advertising. Last month, Facebook announced that 14% of its third-quarter advertising revenue came from mobile, up from almost zero just one quarter earlier.
And then there's Yahoo. The purple portal's stock has shot up more than 30% from its 52-week lows. The main news out of Yahoo over the past few months is that the company lured new CEO Marissa Mayer from Google. (The finalization of the Alibaba transaction helped too.) Yahoo hasn't made any bold moves in mobile just yet, but Mayer has done a good job of making it clear that she thinks mobile is a huge priority. For the time being, Mayer can do no wrong in the eyes of investors. (I've joked that CBS should create a new sitcom called "Everybody Loves Marissa.")
So what should investors in these zombies do now?
You still need to be wary. Apple may be wounded, but it remains a powerhouse. With more than $12o billion in cash and a stock trading at only about 12 times earnings estimates for fiscal 2013, it still is attractive. The recent stock performances of another struggling tech foursome -- Microsoft, Intel (INTC), Dell (DELL) and HP (HPQ) -- show just how hard it is to compete against Apple. (In an homage to Dickens and the holidays, let's call them The Four Tech Ghosts of PC Christmases Past.)
But looking more closely at the not-yet Fab Four of mobile, Facebook appears to have the most promise -- even though it is still an expensive stock, trading at just north of 40 times 2013 earnings estimates.
Facebook has shown concrete improvement in mobile. If that continues, much of the skepticism will dissipate about the company's future ability to be a true profit powerhouse and not just a place where a billion people offer updates about the most minute details of their lives.
Yahoo is intriguing. Mayer is saying all the right things, and morale appears to have improved dramatically as a result. But shares now trade at 16.5 times 2013 earnings estimates. Google trades at about 15 times next year's profit forecasts. Should Yahoo, still very much a turnaround story, deserve a premium to Google? Not right now. Yahoo has to show more signs of growth in mobile before it warrants a higher valuation.
Related: Marissa Mayer on God, family and Yahoo
That brings us to RIM and Nokia. Their P/E ratios are non-existent. E stands for earnings -- and both companies are expected to lose money this year and in 2013. Sales are expected to keep declining at Nokia and to grow a meager 1% at RIM in its next fiscal year. Both stocks may have trouble going much higher for the long-term.
Sure, they could continue to have pops, like RIM had today on analyst upgrades. Both stocks are favorite targets of short sellers and are prone to violent squeezes on "good news" like analyst upgrades.
But RIM and Nokia need more than glowing sell-side coverage to stage a meaningful comeback. They have to boost their market share and revenue in the mobile device market. The recent rally looks more like a dead cat (or smartphone) bounce. Investors may have punished the two stocks a little too hard and are now relieved to find that neither company is the Hostess of the tech world just yet.
But just because you aren't dead doesn't mean you're healthy. Nokia at least has a product on the market that people can look at, so its rally is a bit more grounded in reality.
Related: BlackBerry 10 to launch Jan. 30
RIM is a different story. The BlackBerry 10 could be the company's savior. But does anyone honestly think that customers who have gotten used to iPhones and Android devices (or even new Windows Phones) will flock back to BlackBerry? The RIM rebound seems eerily reminiscent of the PlayBook hype a few years ago.
Shares of RIM plunged more than 40% between March and September of 2010 on worries that the company was getting into the tablet market too late. Shares then surged 65% by February 2011 on hopes for strong PlayBook sales.
RIM traded at about $53 a share when the PlayBook debuted on April 19, 2011. They now fetch about $12. Need I say more?
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