Where Will BlackBerry Go Post-Earnings?

With shares of BlackBerry (NASDAQ:BBRY) trading around $9, 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 on Thursday reported financial results for the three months ended May 31. Revenue for the first quarter of fiscal 2015 was $966 million, down $10 million, or 1 percent, from $976 million in the previous quarter. The revenue breakdown for the quarter was approximately 39 percent for hardware, 54 percent for services, and 7 percent for software and other revenue. During the first quarter, the company recognized hardware revenue on approximately 1.6 million BlackBerry smartphones, compared to approximately 1.3 million BlackBerry smartphones in the previous quarter.

T = Technicals on the Stock Chart Are Mixed

BlackBerry stock has struggled to make positive progress in the last several years. However, the stock is currently surging higher and looks poised to continue. 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 signals neutral price action in the near-term.

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

51.38%

0%

0%

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

Put IV Skew

Call IV Skew

July Options

Average

Average

August Options

Average

Average

As of Thursday, 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 very small 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?

2014 Q1

2013 Q4

2013 Q3

2013 Q2

Earnings Growth (Y-O-Y)

131.25%

344.44%

-41,950%

-308.89%

Revenue Growth (Y-O-Y)

-68.54%

-63.55%

-56.25%

-45.02%

Earnings Reaction

11.22%*

-7.07%

15.51%

1%

*As of this writing.

BlackBerry has seen rising earnings and decreasing revenue figures over the last four quarters. From these numbers, the markets have been pleased 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), and Nokia (NYSE:NOK) – and sector?

BlackBerry

Apple

Google

Nokia

Sector

Year-to-Date Return

-14.3%

16.07%

-1.6%

1.36%

1.38%

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

Conclusion

BlackBerry provides innovative wireless communication products to consumers and companies worldwide. The company on Thursday reported financial results for the three months ended May 31. The stock has struggled to make positive progress but is currently surging higher. Over the last four quarters, earnings have been rising while revenues have been decreasing, which has left investors pleased. Relative to its peers and sector, BlackBerry has been a poor relative year-to-date performer. WAIT AND SEE what BlackBerry does this quarter.

Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

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