Veteran investors may recall how Canada’s Research In Motion, which sold the wildly successful BlackBerry smartphone in the 1990s and 2000s, was a super stock. And in early 2004, BlackBerry stock — known by the ticker symbol RIMM at the time — built the gold standard for a rare IBD-style chart pattern: the short stroke.
A lot has changed since then.
BlackBerry (BB) doesn’t make smartphones anymore. Yet the midcap firm, with a $5.4 billion market value, still boasts a market-beating gain of 44% year to date. The stock finished the second quarter bullishly, up 45%. The decline since June 4, however, has chopped this year’s gains in a meaningful way.
In mid-June, the company posted a net loss of 5 cents a share in the May-ended first quarter of fiscal 2022. Sales of $174 million edged past the FactSet consensus forecast of $171.3 million, but still fell 16% vs. a year ago. This marked the fourth drop in the top line in five quarters.
Shares have traded in choppy fashion lately, to say the least.
No doubt, BlackBerry stock has continued to cool off since June, when Wall Street analysts downgraded the stock. One reason? Cybersecurity-related sales dimmed by 12% vs. the prior quarter.
Notice on a daily chart how BB stock in late June lost technical support near the 21-day exponential moving average. (You can plot this line on MarketSmith and other charting services.) Shares are also beginning to live beneath the medium-term 50-day moving average, a sign of weak share demand.
Is BlackBerry Stock Bottoming Out Now?
On the bright side, BB still appears to gain support among institutional buyers near the long-term 200-day moving average.
So, is Blackberry stock a buy?
This story will examine the stock through the lens of IBD’s time-tested, research-driven CAN SLIM method — a seven-point paradigm for successful stock picking. A look at fundamentals, technical action and mutual fund sponsorship can help you make an informed choice.
Founded in 1984 in Waterloo, Canada, BlackBerry’s internet-enabled smartphones became iconic during the dot-com bubble and even after the Nasdaq’s market top in 2000. During the first half of that decade, BlackBerry became so addictive that some users called their devices “CrackBerry.” Former U.S. President Barack Obama used one in the White House.
But as competition stiffened in the smartphone space and the growth of BlackBerry’s sales and profits lost luster during the back half of the 2000s and early 2010s, the company made a pivotal switch.
Today, the company, led by CEO John Chen, provides security software and services to enterprise and government customers globally. BlackBerry says it secures more than 500 million endpoints, including 175 million cars on the road today. It employs artificial intelligence and machine learning to keep customer data safe and private.
On May 17, the company announced BlackBerry Optics 3.0, a next-generation cloud-based security product, as well as a new zero-trust network access product called BlackBerry Gateway. Earlier in the month, Frost & Sullivan named BlackBerry an innovator in health care cybersecurity. And Chinese EV maker WM Motor said it chose BlackBerry’s QNX branded products to power its advanced W6 SUV.
The company’s president and general manager of BlackBerry’s IOT (Internet of Things) unit, Mattias Eriksson, recently held a fireside chat on the subject. And on July 27, the company said it won a contract from South Korea’s sTraffic, a provider of transport infrastructure systems, to supply the QNX operating system software.
BlackBerry, Meme Stock
Equity and option traders joining the WallStreetBets thread on Reddit and other online social platforms have orchestrated stunning campaigns to send not only BlackBerry stock to stratospheric heights. They’ve done the same with AMC Entertainment (AMC) GameStop (GME), Bed Bath & Beyond (BYND) and Clover Health (CLOV).
BlackBerry stock has also captured attention as one of a cadre of companies that have been heavily sold short in recent years.
Judging by the spectacular move BB stock made in the final two weeks of January, no doubt BlackBerry has symbolized the intention by Robinhood app users and other traders to go after short sellers.
Short sellers sell shares borrowed from a broker. They hope to buy those shares back at a lower price for a tidy gain. But when a stock surges in price, the shorts get forced to buy back shares and close the trade — especially when a trading account is already on margin.
Short covering can act like nitro to a rising stock.
The skyrocketing move by BlackBerry over a four-week time period, going from 6.63 at the start of January to a peak of 28.77 on Jan. 27, illustrated the dangers for short sellers today.
Short interest in BlackBerry stock — or total shares sold short on Wall Street — is no longer extreme.
Short Interest And BlackBerry Stock
Roughly 37 million shares have been sold short, according to data analyzed by MarketSmith. So it would take jut under three days’ worth of BlackBerry’s average trading volume for the short sellers to buy shares and cover their bearish positions. Put another way, at 7% of the stock’s float of 555 million shares, short interest now sits at a normal level.
Meanwhile, please study BlackBerry stock’s action in the final two weeks of January. BB stock engineered a climactic top. Shares rose 105% during the week ended Jan. 29 before retracing nearly all of that gain by week’s end.
In other words, its vertical-like move was unsustainable.
IBD Ratings Today
BlackBerry’s fundamentals do not measure up to, say, those in IBD’s Long-Term Leaders.
The company’s profits grew vs. year-earlier levels just twice in the past eight quarters. In the November-ended fiscal third quarter, earnings sank 33% to 2 cents a share. Sales dropped 18%. The February-ended fiscal fourth quarter echoed this poor performance: The bottom line plunged 67% to 3 cents a share. A 25% drop in sales to $210 million notched the worst year-over-year drop in at least four years.
Wall Street expects a net loss of 16 cents a share in the fiscal year ending in February 2022, before the company turns a profit of 3 cents a share in FY 2023.
Since earnings tend to be the No. 1 factor for a stock’s growth prospects, it may come as no surprise that BlackBerry gets lackluster ratings from IBD. The stock holds a milquetoast Composite Rating of 48 on a scale of 1 (mauled) to 99 (magnificent). The SMR Rating, which analyzes sales, profit margins and return on equity, is a lowly D on a scale of A to E.
BlackBerry gets a middling 43 Earnings Per Share Rating on a scale of 1 to 99. Generally, you want to focus your watchlist of stocks of those with EPS and Composite scores of 80 or higher.
Who Is BlackBerry Owned By?
That said, institutional ownership has been rising.
Total mutual funds investing in BlackBerry stock dipped to 484 at the end of the second quarter in 2020, when coronavirus ravaged the world economy. Yet that number has grown to as high as 533 at the end of Q2 this year.
A stock seeing growing mutual funds ownership and attracting top-notch institutional players is meeting the I in CAN SLIM, or solid institutional sponsorship. A-rated funds that own a piece of BB stock include Mercator International Opportunities (MOPPX), Vanguard Primecap (VPMCX) and Beck, Mack & Oliver Partners (BMPEX).
On the plus side, BlackBerry stock is showing terrific price strength.
Is BlackBerry Stock A Buy?
A 90 Relative Strength Rating points to good overall price action. It means BB stock has outperformed 90% of all companies in the IBD database over the past 12 months.
A handle has not yet formed; such action would hint at a final shakeout of disenchanted holders who bought at higher prices, eager to get out with a small gain or to cut losses after sitting with a huge paper loss. So, the current buy point for now is 28.87, 10 cents above the cup’s left-side high.
That said, recent action clearly shows the 20 price level is posing as a significant level of upside price resistance. BB also appears to have struggling to overcome an overhead supply of eager sellers near 14.
So the stock is not yet a buy now. Yet, a smaller, shallower base within the larger consolidation that sets up a strong price gain past 20 may offer intrepid traders a new entry.
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