Monday, November 18, 2013

Will BlackBerry Find a Bid?

With shares of BlackBerry (NASDAQ:BBRY) trading around $8, 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 co-founder Mike Lazaridis was co-CEO of BlackBerry until last year, still owns a considerable stake in the company, and has been approaching private equity firms Blackstone (NYSE:BX) and Carlyle (NYSE:CG) about a bid for the company, according to sources who spoke to The Wall Street Journal. Lazaridis's 6 percent stake in BlackBerry and deep knowledge of the company would be useful to the various private equity firms interested in BlackBerry, although Friday's earnings report, which revealed the company made half what analysts had been expecting in revenue for the second fiscal quarter, could complicate the quick sale BlackBerry had been hoping for.

T = Technicals on the Stock Chart Are Mixed

BlackBerry stock has not performed well in the last several months. The stock is currently trading at lows for the year, so it may still need time before it finds value. 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 slight below its key averages, which signals neutral to bearish price action in the near-term.


Source: Thinkorswim

Taking a look at the implied volatility 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




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

October Options



November Options



As of Monday, there is 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 very significant amount of call and put option contracts and are leaning neutral to bearish over the next two months.

E = Earnings Are Decreasing 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)





Revenue Growth (Y-O-Y)





Earnings Reaction





BlackBerry has seen decreasing earnings and revenue figures over the last four quarters. From these numbers, the markets have not been 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), and Nokia (NYSE:NOK), and sector?






Year-to-Date Return






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


BlackBerry provides innovative wireless communication products to consumers and companies worldwide. It is being reported that BlackBerry’s co-founder has been approaching private equity firms about a bid for the company. The stock hasn’t done well in recent times and is now trading at lows for the year. Over the last four quarters, earnings and revenues are decreasing, which has led to disappointed investors in the company. Relative to its peers and sector, BlackBerry has been a weak year-to-date performer. WAIT AND SEE what BlackBerry does this coming quarter.

1 comment:

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