Do These Factors Support BlackBerry?

With shares of BlackBerry (NASDAQ:BBRY) trading around $8, 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 reportedly gained some interest from the Chinese electronics company Lenovo, although sources are differing on whether Lenovo’s interested in purchasing BlackBerry as a whole or just parts. The Wall Street Journal reported that Lenovo is interested in buying all of BlackBerry, but Reuters has said that the Chinese company would face too much regulatory scrutiny, particularly in regards to BlackBerry’s secure network. Reuters reported that Lenovo would more likely get BlackBerry’s handset business, while a North American buyer would be better suited for BlackBerry’s network.

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 trading near lows for the year and looks poised to continue this trend. 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 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

67.12%

16%

15%

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

Put IV Skew

Call IV Skew

November Options

Steep

Average

December 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 small 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 Increasing 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 Q2

2013 Q1

2012 Q4

2012 Q3

Earnings Growth (Y-O-Y)

-308.89%

83.84%

178.41%

-96.08%

Revenue Growth (Y-O-Y)

-45.02%

9.37%

-35.97%

-47.21%

Earnings Reaction

-0.99%

-27.76%

-0.89%

-22.73%

BlackBerry has seen mixed earnings and decreasing revenue figures over the last four quarters. From these numbers, the markets have been disappointed 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

-29.70%

-4.60%

42.14%

81.14%

20.16%

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

Conclusion

BlackBerry provides innovative wireless communication products to consumers and companies worldwide. More takeover news is hitting headlines as Lenovo has reportedly gained some interested in the company. The stock has not done well in recent years and is now trading near lows for the year. Over the last four quarters, earnings have been mixed while revenues have been decreasing which has disappointed investors. Relative to its peers and sector, BlackBerry has been a weak year-to-date performer. WAIT AND SEE what BlackBerry does this quarter.

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