Can BlackBerry See a Turnaround?

With shares of BlackBerry (NASDAQ:BBRY) trading around $7, 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 bought a minority stake in privately held U.S. healthcare IT firm NantHealth — and the pair are planning to collaborate on building a smartphone tailored to the medical sector. The two companies told Reuters they are working together to develop a new smartphone tailored to the needs of the healthcare sector — with a launch pegged for late 2014 or early in 2015, according to Jim Mackey, BlackBerry’s head of corporate development and strategic planning, speaking in an interview with the news agency.

Despite being designed as a mobile for diagnosticians and other healthcare workers, the forthcoming handset will still include standard smartphone features — such as the ability to download consumer apps, view videos and play games. “We do plan to make the device available for all, but it will be optimized for viewing 3D images and CT scans,” said Mackey, adding that the tie-up exemplifies BlackBerry’s fresh focus on regulated industries.

T = Technicals on the Stock Chart are Weak

BlackBerry stock has struggled to make positive progress in the last several years. The stock is currently pulling back and may need time to consolidate 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 below its rising key averages which signal neutral to bearish 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

57.26%

30%

28%

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

May Options

Steep

Average

June Options

Steep

Average

As of today, there is an average demand from call buyers or sellers and high demand by put buyers or low demand by put sellers, all neutral to bearish over the next two months. To summarize, investors are buying a minimal amount of call and put option contracts and are leaning neutral to bearish 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 Q4

2013 Q3

2013 Q2

2013 Q1

Earnings Growth (Y-O-Y)

344.44%

-41,950%

-308.89%

83.84%

Revenue Growth (Y-O-Y)

-63.55%

-56.25%

-45.02%

9.37%

Earnings Reaction

-7.07%

15.51%

1%

-27.76%

BlackBerry has seen increasing 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 = Weak 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

-34.30%

-7.00%

-6.95%

-7.73%

-12.99%

BlackBerry has been a poor relative performer, year-to-date.

Conclusion

BlackBerry provides innovative wireless communication products to consumers and companies worldwide. The company has bought a minority stake in privately held U.S. healthcare IT firm NantHealth. The stock has struggled to make positive progress and is currently pulling back. Over the last four quarters, earnings have been rising while revenues have been decreasing, which has left investors optimistic. Relative to its peers and sector, BlackBerry has been a poor relative year-to-date performer. WAIT AND SEE what BlackBerry does this quarter.

Using a solid investing framework such as this can help improve your stock-picking skills. Don’t waste another minute — click here and get our CHEAT SHEET stock picks now.

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