Is BlackBerry a Risky Investment?

With shares of BlackBerry (NASDAQ:BBRY) trading around $9, 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 has sold its U.S. headquarters in Irving, Texas to Brookfield Property Group for an undisclosed amount, just months after the struggling smartphone maker announced it was selling the bulk of its Canadian real estate assets to shore up its cash position. “Brookfield Property Group has purchased BlackBerry’s Irving, Texas campus property,” a BlackBerry spokesperson told the Financial Post in an emailed statement. “BlackBerry will continue to be a tenant on the campus.” BlackBerry did not disclose how much the six-building facility in the suburb of Las Colinas was sold for. The more than 450,000-square-foot facility in the high-profile neighborhood was sold to the Canadian real estate company last Monday, according to Gary Carr, the vice chair with CBRE’s Investment Properties-Institutional Group, which helped broker the deal.

T = Technicals on the Stock Chart Are Mixed

BlackBerry stock has struggled to make positive progress in the last several years. The stock is currently trading sideways and may need time to stabilize before heading higher. 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 between its rising key averages which signal neutral 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

73.92%

76%

74%

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

Put IV Skew

Call IV Skew

April Options

Average

Average

May Options

Average

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 very significant 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?

2013 Q3

2013 Q2

2013 Q1

2012 Q4

Earnings Growth (Y-O-Y)

-41,950%

-308.89%

83.84%

178.41%

Revenue Growth (Y-O-Y)

-56.25%

-45.02%

9.37%

-35.97%

Earnings Reaction

15.51%

1%

-27.76%

-0.82%

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

P = Excellent Relative Performance Versus Peers and Sector

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

BlackBerry

Apple

Google

Nokia

Sector

Year-to-Date Return

23.66%

-4.76%

6.92%

-5.67%

6.03%

BlackBerry has been a relative performance leader, year-to-date.

Conclusion

BlackBerry provides innovative wireless communication products to consumers and companies worldwide. The company has sold its U.S. headquarters in Irving, Texas, to Brookfield Property Group for an undisclosed amount. The stock has not done well in recent years and is currently trading sideways. Over the last four quarters, earnings have been mixed while revenues have been decreasing, which has left investors optimistic. Relative to its peers and sector, BlackBerry has been a relative year-to-date performance leader. WAIT AND SEE what BlackBerry does this quarter.

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