Should You Consider BlackBerry?

With shares of BlackBerry (NASDAQ:BBRY) trading around $10, is BBRY an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

BlackBerry is a designer, manufacturer, and marketer of wireless solutions for the worldwide mobile communications market. Through the development of integrated hardware, software, and services, it provides platforms and solutions for seamless access to information such as email, voice, instant messaging, SMS, Internet, intranet-based applications, and browsing. Its products and services feature the BlackBerry wireless solution, the Research In Motion Wireless Handheld product line, the BlackBerry PlayBook tablet, software development tools, and other software and hardware.

BlackBerry CEO John Chen has been referred to as the “turn around CEO” by Damian Wojcichowsky of Jacob securities, in an interview. Wojcichowsky talked about Chen, whom he called a former SAP AG, as well as Ex Sybase executive. Damian is positive on the survivability of the company. Sybase, the database company in Canada, has undergone similar growth phase as BlackBerry. The company saw its 95 percent of market capitalization diminishing and was on the verge of extinction. Chen was hired, he did his job well by reviving the company and then selling it off to SAP at around double its prior high valuation and took a job at SAP. He said that John Chen is a “turnaround CEO” and it is his “bread and better.” According to the Damian, Chen is a bit bold who calls a spade a ‘spade.’ After his arrival, at BlackBerry he out rightly hinted that a full turnaround is the only option left with the company.

In the following days, Chen took steps to pull down the focus from consumer hardware part and turned it towards enterprise segment. He is working towards finding new applications for the enterprise customers. BlackBerry has always been a lawyer and accountants preferred brand and chunk of its revenue came from the enterprise segment. There was a time when the company was one of the top three handset makers. After the fall, the Canadian smartphone maker is returning back to enterprise customers. BlackBerry has sieved many benefits from its R&D efforts, but has been an example “blindingly innovative company,” according to Damian Wojcichowsky. The company has been a pioneer in offering products like Smart Phone, email over the airwaves and so on. According to Wojcichowsky, there are few things that will work in favor of the company, in the long term. Bearish investors are pulling out their money from the stock on the back of depressing hardware sales.

T = Technicals on the Stock Chart are Strong

BlackBerry stock has struggled to make positive progress in the last several years. However, the stock is currently trading near highs for the year and looks set to continue. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, BlackBerry is trading above its rising key averages which signal neutral to bullish price action in the near-term.

BBRY

Source: Thinkorswim

Taking a look at the implied volatility (red) and implied volatility skew levels of BlackBerry options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

BlackBerry Options

55.49%

36%

33%

What does this mean? This means that investors or traders are buying a minimal amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

August Options

Flat

Average

September Options

Flat

Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a minimal amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on BlackBerry’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for BlackBerry look like and more importantly, how did the markets like these numbers?

2014 Q1

2013 Q4

2013 Q3

2013 Q2

Earnings Growth (Y-O-Y)

131.25%

344.44%

-41,950%

-308.89%

Revenue Growth (Y-O-Y)

-68.54%

-63.55%

-56.25%

-45.02%

Earnings Reaction

9.65%

-7.07%

15.51%

1%

BlackBerry has seen increasing earnings and decreasing revenue figures over the last four quarters. From these numbers, the markets have been pleased with BlackBerry’s recent earnings announcements.

P = Average Relative Performance Versus Peers and Sector

How has BlackBerry stock done relative to its peers, Apple (NASDAQ:AAPL), Google (NASDAQ:GOOG)(NASDAQ:GOOGL), Nokia (NYSE:NOK), and sector?

BlackBerry

Apple

Google

Nokia

Sector

Year-to-Date Return

1.72%

21.06%

2.18%

-3.96%

6.25%

BlackBerry has been an average performer, year-to-date.

Conclusion

BlackBerry provides innovative wireless communication products to consumers and companies worldwide. The company CEO John Chen has been referred to as the “turn around CEO” by Damian Wojcichowsky of Jacob securities. The stock has struggled to make positive progress, but is currently trading near highs for the year. Over the last four quarters, earnings have been rising while revenues have been decreasing, which has left investors pleased. Relative to its peers and sector, BlackBerry has been an average year-to-date performer. WAIT AND SEE what BlackBerry does this quarter.

Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

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