How Will Recent Headlines Affect 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, including email, voice, instant messaging, SMS, Internet, intranet-based applications, and browsing. Its products and services include 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’s Q10 full-keyboard smartphone has had highly disappointing sales, and that’s putting it lightly. While BlackBerry hasn’t released any figures, carriers and retailers have reported that the device has not done well despite BlackBerry’s assertions that it owns the keyboard phone market. One store operator told The Wall Street Journal, “We saw virtually no demand for the Q10 and eventually returned most to our equipment vendor.”

T = Technicals on the Stock Chart are Weak

BlackBerry stock has not done very well over the last several years. The stock is currently searching for value near lows for the year. 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

75.10%

93%

90%

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

September Options

Steep

Average

October 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 very significant 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 Decreasing 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)

86.87%

-78.23%

-96.08%

-171.43%

Revenue Growth (Y-O-Y)

9.13%

-41.26%

-47.21%

-31.07%

Earnings Reaction

-25.20%

-0.89%

-22.73%

5.04%

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

-13.00%

-6.94%

21.52%

0.38%

5.35%

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

Conclusion

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