Is BlackBerry Well-Positioned for the Future?

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 lost the support of one of its founders, as former CEO Mike Lazaridis has reduced his remaining stake in the company after BlackBerry gave up on a decision to sell itself and instead installed new CEO John Chen and obtained $1 billion in financing from Fairfax Financial Holdings. According to a regulatory filing seen by Bloomberg, Lazaridis sold over $26 million worth of his stock in BlackBerry this week, leaving him with 26.3 million shares or a 4.99 percent stake in the company’s outstanding shares. Lazaridis was one of the many parties considering a bid on BlackBerry when the company was still up for sale.

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 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

67.98%

26%

23%

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

January Options

Average

Average

February Options

Average

Average

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

-41950.00%

-308.89%

83.84%

178.41%

Revenue Growth (Y-O-Y)

-56.25%

-45.02%

9.37%

-35.97%

Earnings Reaction

15.51%

1.00%

-27.76%

-0.82%

BlackBerry has seen mixed earnings and decreasing revenue figures over the last four quarters. From these numbers, the markets have not been too happy 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

-32.40%

8.61%

57.41%

97.13%

12.20%

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 lost the support of one of its founders. The stock has not done well in recent years and is now pulling back. 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. STAY AWAY from BlackBerry for now.

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