Can BlackBerry’s Stock Rebound?

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.

As a part of the plan to make the company profitable again, BlackBerry is selling off the majority of its real estate holdings in Canada to the U.S.-based Spear Street Capital for around $278 million. The company said it expects to sell properties with a value that is 80 percent of the deal later this month and the rest by the third-quarter of 2014. The deal includes 3 million feet of space and vacant lands, and the company said it will lease some of the space back in a bid to keep up its presence in Canada. News of the sale helped drive shares down 2.7 percent on Monday, cutting into the stock’s positive year-to-date performance.

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. 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 rising 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

59.02%

46%

44%

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

Put IV Skew

Call IV Skew

June Options

Steep

Average

July 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 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 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 Q4

2013 Q3

2013 Q2

2013 Q1

Earnings Growth (Y-O-Y)

344.44%

-41,950%

-308.89%

83.84%

Revenue Growth (Y-O-Y)

-63.55%

-56.25%

-45.02%

9.37%

Earnings Reaction

-7.07%

15.51%

1%

-27.76%

BlackBerry has seen rising earnings and decreasing revenue figures over the last four quarters. From these numbers, the markets have had conflicting feelings 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

-27.10%

8.98%

-6.45%

-5.91%

-6.62%

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

Conclusion

BlackBerry provides innovative wireless communication products to consumers and companies worldwide. The company is selling off the majority of its real estate holdings in Canada to the U.S.-based Spear Street Capital for around $278 million. The stock has struggled to make positive progress and is currently pulling back. Over the last four quarters, earnings have been rising while revenues have been decreasing, which has produced conflicting feelings among investors. Relative to its peers and sector, BlackBerry has been a poor relative year-to-date performer. WAIT AND SEE what BlackBerry does this quarter.

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