Will Recent News Send BlackBerry Stock Higher?

With shares of BlackBerry (NASDAQ:BBRY) trading around $11, 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 could have a buyer as soon as November, according to people familiar with the matter who spoke to the Wall Street Journal. The sources said BlackBerry has been in talks with parties interested in buying the company as a whole or in pieces since the struggling smartphone maker announced it would explore some “strategic alternatives” in August. The board of the company wants the sale process to move quickly and is hoping to find a buyer by November.

T = Technicals on the Stock Chart Are Mixed

BlackBerry stock has not done very well in the last couple of years. The stock is currently seeing a strong bounce from 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 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

77.39%

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

Flat

Average

October Options

Flat

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 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)

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 not been too happy 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

-7.58%

-6.44%

24.31%

38.99%

7.19%

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

Conclusion

BlackBerry provides innovative wireless communication products to consumers and companies worldwide. The company may have a buyer by as soon as November. The stock has struggled in recent years but is now bouncing from lows for the year. Over the last four quarters, investors in the company have not been too happy as earnings and revenues have been declining. Relative to its peers and sector, BlackBerry has been a weak year-to-date performer. WAIT AND SEE what BlackBerry does in coming 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.

More Articles About:   , , ,  

More from The Cheat Sheet